The horizontal analysis of Walmart’s income statements shows a significant increase in the items of the income statement between 2014 and 2015. This was first displayed by the significant increase in the new sales by 1.93%. Irwin (2016) suggests that in 2015, Walmart initiated an objective to pay its employees more and make the stores cleaner. This could have been one of the reasons which boosted the company sales; customers are attracted to clean vendors. This led to an overall increase in the net income by 2.13%.
The vertical analysis suggests that the company is spending a huge percentage of its sales on the costs of sales. The percentage is 75.17% which means that the remaining 24.89% is shared among other items of the income statement. Walmart also spends a huge percentage of its sales on the selling and administrative expenses which account to 19.24% of the total sales. Overall, the dollar amount of sales that contributes to the net income is 3.37%.
According to the horizontal analysis, there was a total decrease in the total assets between 2014 and 2015 by -0.51%. The probable cause would be the fact that the company invested more on its workers than assets as suggested by Irwin (2016). However, Walmart’s shareholders’ equity increased by 6.74%. This is probably due to the increase in the net income in 2015 which was included in the retained earnings; one of the items in the company’s equity.
The vertical analysis suggests that a huge percentage of the company’s total assets is occupied by the net property and equipment, and inventories. Their percentages are 56.1% and 22.16% respectively. Additionally, about 57.81% of the company’s assets are financed by debt (100 – 42.19). Overall, the company is financially stable and healthy.
The current ratio shows Walmart’s ability to meet its short-term financial obligations using its current assets (Goel, 2015). In 2015, the company’s current ratio was at 0.97. This means that the company has more current liabilities than current assets and thus this means in terms of liquidity, the company is relatively unstable. Additionally, the quick ratio was at 0.28. The company does not have enough quick assets to pay off its current liabilities.
According to the solvency ratios, 57.81% of assets and 137.04% of the company’s equity are financed by debt. The solvency ratios suggest that the company is financed by debt. This is because the company has more debt than the equity. Furthermore, the current ratio displayed a situation where the company has more current liabilities than current assets.
The net profit margin ratio suggests that the company is not generating enough yields from its total sales. The net profit margin is only 3.37%. The return on equity is the ratio of the dollar profit generates from the dollar of its equity (Goel, 2015); in 2015, this ratio was at 19.04%.
In 2015, the company’s Earnings Per Share was at $5.07. This is the amount of profit which is allocated to each share. Thus, during that fiscal year, the value of the share was at $5.07. Lastly, the company had a P/E ratio of $16.56.
Overall, the ratios suggest that the company is financially healthy and stable. Consequently, the company should try reducing its debt obligation since if it accumulates the company would be in jeopardy.