Analyzing the Financial Statements of the World's Largest Retailer: Wal-Mart

The Wal-Mart case is intended for an introductory or main course on Financial Statement Analysis. It may also be useful within a Corporate Finance/Financial Management course. After a class on financial statements and liquidity, profitability and solvency ratios – and some brief examples discussed by the lecturer – students should be capable of making a financial analysis of Wal-Mart. Students can be asked to make this analysis in class, or to prepare the case outside the classroom, and to present it. Ideally, the case work is conducted in groups of 4 to 6 students, and it typically takes between 1 to 1.5 hours (for the analysis itself – obviously, drafting a written report or presentation is more time consuming). The Wal-Mart case is aimed at both undergraduate and graduate students, and for general management programmes/MBAs as well as finance students – obviously, for the latter group, a much more fine-grained analysis, extensive discussion and adequate linking among various financials and between the numbers and Wal-Mart’s business is required. Evidently, the lecturer should highlight many more details in a class of finance students.

In the teaching note, the authors first provide a detailed discussion of Wal-Mart’s balance sheet, profit and loss account and cash flow statement, mainly based upon common base and common size analysis. While the focus is on 2009 figures, conclusions for 2008 would be broadly similar. Furthermore, they also provide an overview of some key financials’ evolution over the past 10 years. Next, they calculate and interpret liquidity, profitability and solvency ratios for 2008 and 2009 and link these to Wal-Mart’s business model and operating activities. They summarize the main findings in a concluding section. Finally, the authors include a slide show that can be used while teaching this