CASE STUDY OF FINANCIAL STATEMENTS FOR WALMART AND MACY’S

1. Return of Equity (ROE) = Net income/Average shareholder equity.

2. Return of Assets (ROA) = Earnings before interest/Average total asset.
= (Net income + [Interest Expense *(1-Tax Rate)])/Average total asset.
3. Return of Financial leverage (ROFL) = ROE -ROA.
4. Accounts Payable Turnover (APT) =Cost of goods sold/ Accounts Payable.
5. Profit Margin = Earnings before interest/ Sales revenue.
6. Asset Turnover = Sales revenue / Total assets.
7. Accounts Receivable Turnover (ART) =Sales revenue/ Accounts Receivable.
8. Collecting Money from Sales = 52/ ART.
9. Inventory Turnover =Cost of goods sold/ Inventories.
10. Inventory sat with firm = 52/ INVT.
11. Property, Plant and Equipment Turnover (PPET) = Sales Revenue/PPE.
12. Cash to Cash (C2C) cycle = (-Weeks payable/APT) + (Weeks inventory/INVT) + (Weeks
Receivable /ART)

Parameters and their values

Sl
Parameters Walmart Macy's
No
1 Tax Rate 0.35 0.35
2 Net Income 17756 1198
3 Average share holder equity 76343 6051
4 Interest Expense 2251 425
5 Avg total asset 203105 20991
6 Cost of goods sold 352488 16538
7 Accounts payable 59099 4951
8 Sales revenue 469162 27686
9 Accounts Receivable 6768 371
10 Inventories 43803 5308
11 Property, plant and equipment 116681 8196
 Comparison of financial matrices of Walmart and Macy's

Walmart Metrics Macy's

23.26% Rate of Equity 19.80%
9.46% Rate of Assets 7.02%
13.80% Rate of Financial Leverage 12.80%
5.96 Accounts Payable Turnover 3.34
4.10% Profit Margin 5.32%
2.31 Asset Turnover 1.32
69.32 Accounts Receivable Turnover 74.62
0.75 Collecting money from sales(weeks) 0.70
8.05 Inventory Turnover 3.12
6.46 Inventory sat with firm(weeks) 16.69
4.02 Property, Plant and Equipment Turnover 3.38
-1.5 Cash to Cash cycle(weeks) 1.82

Walmart performs better on:

 Rate of Equity – Walmart is better performing firm than Macy’s in the view of a
shareholder; Walmart have more return of investment by shareholders equity.
 Rate of Assets –Walmart have better measures of the return earned on each dollar
invested by the firm in assets than Macy’s.
 Rate of Financial leverage – Walmart have better ROFL since it has better performance
in ROE and ROA than Macy’s.
 Asset Turnover – Walmart have its asset turnover better by having a higher inventory
turnover and property, plant and equipment turnover than Macy’s.
 Inventory Turnover –Inventory turn over of Walmart is higher than Macy’s which implies
Walmart have better inventory management (ability to generate sale) than Macy’s.
 Cash to Cash cycle – Walmart have more time to collect money from sales before it had
to pay to its suppliers than Macy’s. The drivers that explain the difference in
performance is Information and Sourcing. Better information and sourcing help the firm
to perform better, increase efficiency, improve responsiveness and reduce cost of the
firm.
 Property, Plant and Equipment Turnover – Walmart performs better in PPET and Cash to
Cash cycle. The drivers that explain the difference in performance of the firm is
 ‘facilities. Facilities are the physical location in supply chain. This ratio explains that
Walmart need less storage space compared to Macy’s.

Macy’s performs better on:

 Profit Margin – Macy’s have better profit margin because it has a lower asset turn over,
returns of assets and returns of equity than Walmart. Hence Macy’s firm is more
profitable than Walmart.
 Accounts Receivable Turnover – Macy’s can collect money more quickly than Walmart
as its accounts receivable turnover is higher.
 Accounts Payable Turnover – Macy’s have better accounts payable turnover than
Walmart. The drivers that affect profit margin, accounts receivable turnover, accounts
payable turnover are transportation cost and cost of goods.