As of January 31, 2015, Walmart reported balance sheet total assets and total liabilities of $204 billion
Question:
As of January 31, 2015, Walmart reported balance sheet total assets and total liabilities of $204 billion and $118 billion, respectively. In the footnotes the company disclosed future operating lease payments of $17.9 billion. Future capital lease payments of $5.4 billion were discounted to $2.9 billion and disclosed at that amount on the balance sheet.
REQUIRED:
a. Describe the difference between a capital lease and an operating lease.
b. Explain why a company might want to treat its leases as operating leases.
c. Compute the effect on Walmart’s total liability/total assets ratio if the company treats all its leases as capital leases. Assume that future operating lease payments are discounted at the same rate as future capital lease payments.
d. Explain how this kind of analysis may be useful to an analyst trying to compare the financial position and performance of two companies that rely heavily on leasing.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a On the financial statements a capital lease is treated like the company had purchased the fixed as...View the full answer
