Merchandising Operations and Inventory in Walmart Inc Essay

Walmart Inc is a multinational corporation that manage grocery stores, hypermarket and discount departments around America .According, to the Global fortune research firm, the company is worth approximately US$486 billion. The financial year of the company begins on February 1.

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Inventory value determines the value of the unsold good at the end of a financial year. Walmart Company determines inventories primarily using the retail accounting system known as last in, first out (LIFO) technique. The stocktaking method used by Walmart results in goods being valued using the market or lower of cost method. Besides, markdowns record a decrease in the value of retail inventory. The financial year 2017-2018 shows the inventory value of Walmart company was 43783 million USD$. Additionally, cost of goods sold (COGS) determines the value of products sold by a company in a financial year. Walmart's Inc total inventories are 373.3 Billion USD$.

An income statement is also known as a profit and loss account (P &L) as it indicates expenses, income, and losses or profits of companies in a fiscal accounting year. The P&L statement is a primary document prepared during the accounting process as it provides details of loss and net income. The two main formats used by companies for computing the income statement are the single step and multi-step profit and loss statement. Walmart has adopted the use of the multistep procedure (Martinez, Galvan, & Alam, 2017).. The technique divides the expenditure accounts into reliable and more relevant financial records depending on their purpose. Operating, Cost of goods sold and non-operating expenses are separated and used for computing gross income, margin profit, and net income.

Gross profit refers to the net income of a company after the deduction of expenses associated with the production of goods and provision of services. The income statement contains information on a company profit which is calculated using the formula Gross profit = income - COGS (Cost of Goods Sold). The total revenue of Walmart company is500.34 B USD while the COGS is 373.4B $ therefore, the gross profit is (500.34-373.4)/500.34 =0.25B $(Afonso, Baxa, & Slavik, 2018). Computing of the percentage gross profit is by multiplying the gross profit by 100 (0.25 x 100) =25%. In the 2016-2017 financial years, Walmart recorded a gross percentage profit of 24 %. Therefore, the company has improved its income margins by one percent as the 2017-2018 percentage gain is 25%.

An Inventory turnover is calculated by dividing the cost of sold goods by the total inventories. Walmart computes its turnover after three months (Afonso, Baxa, & Slavik, 2018). Walmart Inc's COGS in Apr. 2018 was $91,707 Million and the Total Inventories was $43,543 Million (Afonso, Baxa, & Slavik, 2018). Therefore the quarterly turnover was (91,707/43,543) million $ is 2.11. Additionally, the day sale inventory indicates the number of goods sold in a specific number of days. Walmart day's catalog in April 2018 shows the day sales are 43.33(Afonso, Baxa, & Slavik, 2018).

A financial ratio enables the comparison of various fiscal documents. Additionally, the management of a company uses the information to identify the strength and weakness of their companies (Afonso, Baxa, & Slavik, 2018). Walmart financial ratios are relatively stable as the figures do not have many variations. For example, the rate of cost of goods sold for the last three fiscal years is 74.87:74:35:74.63 respectively.

Conclusion

In conclusion, Walmart financial information is essential as it provides investors and the management of the company vital information used during decision making processes. The performance of the corporation indicates stability and consistency in their performance.

References

Afonso, A., Baxa, J., & Slavik, M. (2018). Fiscal developments and financial stress: a threshold

VAR analysis. Empirical Economics, 54(2), 395-423.

Martinez, A. B., Galvan, R. S., & Alam, S. (2017). Financial Analysis of Retail Business Organization: A Case of Wal-Mart Stores, Inc. Nile Journal of Business and Economics, 3(5), 67-89.