Acc 561 Week 3 American Corporation Analysis

ACC 561 WEEK 3 AMERICAN CORPORATION ANALYSIS

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ACC 561 Week 3 American Corporation Analysis,

American Corporation Analysis

The reasoning behind financial analysis is to give a better perspective about the financial structure and profitability position of the corporation. Such corporations as Wal-Mart Incorporated benefit considerably from a financial analysis because it assists in determining the durability in handling sales, assets, and debts. Wal-Mart was established in 1962 by Sam Walton in Rogers, Arkansas; by 1967 24 stores were open with a $12.7 million sales revenue. In 1970, the corporation became a publicly traded company with stocks at $16.50 per share. Ten years later Sam Walton reached $1 billion in sales annually, beating out other major competitors. In 1990, Wal-Mart was the number one retailer nationally, and continued its success by going international. Today, Wal-Mart employs 2.2 million associates in North America and internationally, serving over 200 million customers weekly at more than 11,000 stores.

Horizontal Analysis

After completing the horizontal analysis of Wal-Mart’s consolidated balance sheets for the years of 2011 and 2012, several elements stand out with significant variances. For example, Wal-Mart’s cash and equivalents decreased by 11% while total assets increased by 7%. Prepaid expenses saw a significant decrease of 43% in 2012 which could indicate better cost control and current asset utilization. The red flag item on the balance sheet is short-term borrowing, which saw an increase of $292 in 2012; this could indicate a significant short-term financing of operating expenses. Accrued income taxes in 2012 also increased by 641% that raises the questions in regards to income tax declaration practices by the corporation (See Appendix A).

The consolidated...