5.5 - Discussion: Current Assets

1

Financial Statements AnalysisDirections

Using the Annual Report of your selected company (WALMART) answer the following questions in the Discussion:

• What is the name of the outside auditing firm for your company?
• How long after the company's year-end did the auditor's issue their opinion?
• Who bears primary responsibility for maintaining effective internal control over financial reporting? How can you tell?
• Does it appear the company has adequate internal control procedures? How can you tell?
• By how much did the company's cash balance change from the beginning of the year to the end of the year?
• What type of instruments does the company consider to be cash equivalent?
• Calculate the cash ratio. How does this ratio compare with the industry?
• What is the balance of accounts receivables for the company?
• Compute the acid-test ratio. If the current liabilities came due immediately, could the company pay them?
• Compute the accounts receivable turnover at year end.
• Compute days sales in receivables at year end.
• Based on the acid-test ratio, accounts receivable turnover, and days sales in receivables, how does the company compare to the industry?

Post the name of your selected company and the link to the statement with your discussion post. You may use a service such as Yahoo Finance to help research industry averages. The notes to the financial statements will also be of use in answering the discussion questions. For many of the ratios in the discussion, you will need 2-3 years' worth of financial data.

Read the posts of your classmates on their chosen companies, review the applicable Income Statements, and reply to at least two of your peers.

Review the rubric which will be used to evaluate each discussion board posting for this course.

2017 Annual Report Learn more about how Walmart is moving with speed with our enhanced digital annual report at stock.walmart.com 2017 Annual Report Wal-Mart Stores, Inc. (NYSE: WMT) 702 S.W. 8th Street Bentonville, Arkansas 72716 USA 479-273-4000 walmart.com Moving with SPEED Walmart's investor relations app: anytime, anywhere access to financial and company news Our IR app offers shareholders an array of investor resources in a user-friendly format. With the app, you can access quarterly results, stock price, financial presentations and company news at any time from your mobile device. It's available for the iPad, iPhone, Android or Microsoft device. Download the free app from iTunes, Google Play or by scanning this QR code. Global Responsibility ED US IN 10 % 0 Apple, the Apple logo, iPhone and iPod touch are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android, Google Play and the Google Play logo are trademarks of Google Inc. NT RI G The minimized environmental footprint of this report is the result of an extensive, collaborative effort of Walmart and our supply chain partners. The environmental and social impact continues to be an important consideration. It is printed on paper from well-managed forests containing recycled PCW fiber that is Elementally Chlorine Free (ECF). It is printed using 100 percent renewable wind power (RECs), along with environmental manufacturing principles that were utilized in the printing process. These practices include environmentally responsible procurement, lean manufacturing, green chemistry principles, the recycling of residual materials and reduced volatile organic compound inks and coatings. GY As associates, we all play a role in creating an even better Walmart that saves customers time and money. W R to serve customers better is how Walmart became the company it is today. Now, we're transforming to make every day easier for busy families. P Moving with speed to win the future of retailit's in our DNA. Innovating The work we do to help people live better extends far beyond the walls of our stores. We're committed to making a difference by working to create economic opportunity, enhance the sustainability of our operations as well as the systems we operate in, and strengthen local communities. From supporting the development of our associates, suppliers and women entrepreneurs to pursuing a more affordable, secure food supply chain, to helping to build resiliency in the face of disasters, Walmart seeks to create value for stakeholders across business and society, because shared value enhances the quality and viability of solutions. To learn more about these initiatives and others, read our GRR by visiting corporate.walmart.com/2017GRR. IND EN E Supplied by Community Energy Rainforest Alliance CertifiedTM SmartWood Program Labeling Guidelines Dear shareholders, associates and customers: As I sit down to write this year's letter, I'm feeling proud of the progress we're making at Walmart and, most specifically, the passion and hard work exhibited by our associates. I'm encouraged by the way we're moving with greater speed to better serve customers. Our business is getting stronger. In the U.S., we've delivered positive comp store sales for ten consecutive quarters and we're hearing from our customers that their experience continues to improve. Sam's Club comp sales improved throughout the year and members are increasingly using our digital tools like Scan & Go and Club Pickup. Outside the U.S., ten of our 11 markets posted positive comp sales this past year. Across our business segments, e-commerce growth is accelerating. Our strategy to serve customers through e-commerce and our stores in a seamless way is gaining traction. The momentum we're seeing is real and I'm excited about what the future holds. \" At Walmart, we're harnessing the power of technology and the investments in our associates to create new ways of serving customers and provide associates with more opportunities to grow their careers. DOUG MCMILLON President and Chief Executive Officer, Wal-Mart Stores, Inc. Walmart 2017 Annual Report 1 We're clearly living in a time of transformative change. The world is moving faster and the magnitude of the changes, and their influence on business, seem larger than I can remember. In retail, the things made possible by technology are fundamentally transforming this industry. These changes are creating compelling ways for customers to save time and gain easy access to products and services they didn't have before. At Walmart, we're harnessing the power of technology and the investments in our associates to create new ways of serving customers and provide associates with more opportunities to grow their careers. We've been preparing ourselves to take advantage of the opportunities presented and we have four objectives that we're focused on this year. First, we want to make every day easier for busy families. Customers are time-crunched, so we want their shopping experience with us to be fast and easytruly seamlessin all the ways they want to shop: in stores, on their mobile device, or through pickup and delivery. I'm excited by many of our recent initiativeslike the free 2-day shipping offer with a $35 minimum order from Walmart.com, the expansion of online grocery around the world, and Sam's Club's launch of Scan & Go across the U.S.because of the convenience these initiatives provide. The strategic acquisitions of Jet, ShoeBuy, Moosejaw and ModCloth, as well as the alliance with JD.com in China, provide customers with a broader assortment as well as more ways to save time and money. It's truly been a significant year of progress on this front. Our second key objective is to change the way we work. We're focused on becoming more of a digital enterprise. We're working to increase productivity with more efficient internal processes and creating more real-time information 2 Walmart 2017 Annual Report at our finger tips, supported by more advanced analytics. We're providing in-store associates with the tools they need, like apps and tablets, to make it easier to gain insight into our performance. Our goal is to increase our speed, effectiveness for customers and productivity throughout the business. We're also working to strengthen the performance mindset of our culture and fight bureaucracy that can plague large companies. A strong and effective culture is foundational to success and we're shaping ours to drive performance and create even more opportunity for our diverse group of associates in an inclusive work environment. \"Customers are time-crunched, so we want their shopping experience with us to be fast and easytruly seamlessin all the ways they want to shop: in stores, on their mobile device, or through pickup and delivery.\" Third, we will deliver results and operate with discipline. We were founded on an everyday low-cost mentality but we think we have opportunities to work in new ways and find a path to a lower cost base. This is vital for our future. We'll be smart with how we allocate capital to drive long-term value for our shareholders. We're after efficient growth. We will focus on growing more through Our plan to win Make every day easier for busy families Change how we work Deliver results and operate with discipline Be the most trusted retailer e-commerce and comp sales in our current store fleet and rely less on new store growth in the U.S. We'll also continually look at our portfolio to make sure we're positioned to win. We'll invest in our core business with store remodels, technology and customer initiatives like online grocery and pickup, while at the same time being open to divest non-core assets if it's in our best interest. The fourth objective is to be the most trusted retailer. During this time of change, customers are watching the companies they spend their time and money with more closely than ever. The way we earn their trust is through our associates doing the right thing every daybeing creative, curious, ethical, service oriented and embodying our purpose of making lives better for others. If everyone could see inside the company I've come to love, they would feel even better about the company. We're doing things people would expect from Walmart: focusing on lowering pricesnot by cutting corners, but by being better at delivering great items more efficiently than our competitors; and constantly innovating to save customers time as well as money. We're also doing things that might surprise some people. We've made significant investments in our associates, providing the career opportunities they deserve and skills necessary to be successful at Walmart or wherever their career takes them. Over the last decade, we've become one of the most environmentally sustainable retailers (and companies) in the world and we're raising the bar even higher. We're investing in making our supply chain safer and more transparent so customers can be confident that the products they purchase are sourced the right way. And, we have embraced the journey towards the concept of \"shared value\" as espoused by Dr. Michael Porter of Harvard Business School, which challenges us to create a business model that is not just good for shareholders but better for everyone: customers, associates, suppliers, communities and society in general. We've worked hard over the years to earn the trust of those we serve and do business with around the world. By no means am I saying Walmart is perfect. We'll make honest mistakes along the way, but we won't let up until we get it right. Our purpose is simple: we save people money so they can live better. We take both aspects of our purpose seriously. We want to thank you for believing in us...for investing in our future. We are a company of the future. As I stated earlier, we're operating from a strong foundation built by those before us and taking action aimed at strengthening our business this year and beyond. We'll continue to strengthen our stores around the world, we'll continue to build our e-commerce and digital capabilities, and we'll put them together in a way that saves customers time and money. And as they choose to shop with us, we'll be doing things behind the scenes to create shared value for all so they are confident that their trust in us is well-placed. Honored to serve, Doug McMillon Walmart 2017 Annual Report 3 Q&A Creating a seamless experience for the customer A conversation with Doug McMillon, President and Chief Executive Officer, Wal-Mart Stores, Inc., Marc Lore, President and CEO, Walmart eCommerce U.S., and Greg Foran, President and CEO, Walmart U.S. Q: \u0007You have over 4,600 retail stores in the U.S. What role will they play in creating a seamless experience for customers? Doug A lot of customers continue to do most of their shopping in stores. In fact, we've had increased customer traffic in our stores for nine consecutive quarters now. Our stores also represent thousands of points of distribution that provide a competitive advantage against pure e-commerce retailers. Walmart stores are located within 10 miles of approximately 90 percent of the U.S. population. This physical presence in nearly every community enhances customer choice on how they receive merchandise while also strengthening their connection to their local store. When customers want immediacy, our stores can fulfill that need. For those who want home delivery within two days, we can do this too. For others who prefer to order online and pick up in-store at the time of their choosing, we can accommodate them as well. This integration of stores and e-commerce is a differentiator. We will serve customers in all the ways they want to be servedin stores, online, via mobile, voice, pickup and delivery. Q: Why is the combination of Walmart and Jet.com such a great strategic fit? Doug Marc We're passionate about moving with speed to better serve customers and accelerate our e-commerce growth. That's why we were so excited to bring Jet into our e-commerce family of brands and to have Marc lead the next chapter of our U.S. e-commerce transformation. Our philosophies on how to best serve customers are well-aligned. The Jet.com team has the expertise, capabilities and assets that will allow us to scale e-commerce faster. \u0007 e built Jet.com on three core values: trust, transparency and fairness. All these values empower peopleboth W customers and associates. Those values fit very well with Walmart's. When you're transparent with customers and treat them fairly, you build trust. We're operating Walmart and Jet as distinct brands. Jet indexes strongly with millennial customers and tends to serve a more urban and more affluent customer than Walmart. With our recent acquisitions of ShoeBuy, Moosejaw and ModCloth, we've broadened our assortment and expertise in key categories and we've brought more premium brands into our ecosystem to continue to drive growth. 4 Walmart 2017 Annual Report Q: B \u0007 asket economicswhat is it and why is it important to your e-commerce success? Marc T\u0007 he key to success in e-commerce is winning in logistics and supply chain. Most marketplace platforms are inefficient in that the lowestpriced retailer typically wins the order, regardless of their proximity to the customer. Conversely, at Jet we use smart-cart technology to let customers see how they can save money on shipping and other costs as they build bigger baskets. By understanding the order destination, we encourage customers to buy items that will ship together from one of our strategically located fulfillment centers or from one of our third-party vendors. As we make these costs transparent, we're changing consumer behavior to save them money and make the transaction more economical for Walmart. Greg \u0007 almart's advantage has always been providing the lowest prices on W a basket of goods in stores. In fact, a supercenter is actually built to provide basket economics. Our goal is to win baskets of goods in all ways the customer shops. From an environmental aspect, it is much more sustainable to ship multiple items in one box to a customer than have multiple boxes shipped with individual items. So that's what we're focused on when the customer wants their goods shipped to home. And as Doug mentioned, we have over 4,600 retail stores to leverage for customers who want immediacy as well as for customers to pick up goods ordered online. We've made positive strides in improving the customer experience in our stores. We're working to improve further and to create new exciting ways to leverage our stores for the customer. Q: \u0007What progress has been made on integrating U.S. e-commerce and improving capabilities for customers? Marc \u0007 e're truly moving at the speed of a startup. I've established my W leadership team, and we've taken rapid strides to leverage the combined strengths of Walmart.com and Jet.com. We've streamlined certain back office functions to maximize our strengths in areas like merchandising and marketing. We're focused on harmonizing our fulfillment networks and leveraging our scale in sourcing, shipping and marketplace. We launched free two-day shipping to a customer's home or local store on millions of items at Walmart.com for orders over $35. Walmart's next-generation fulfillment network enables us to deliver this promise in a cost-effective manner. We've also acquired several e-commerce businesses, adding key expertise and brands in higher-margin categories. \u0007 hat I find so exciting are the vast assets at our disposal. Walmart W possesses sourcing capabilities that are unmatched in retail. We're also leveraging tremendous data from the more than 140 million weekly customers that shop in U.S. stores to bring increased personalization and convenience for e-commerce shopping. We're making real progress creating a seamless shopping experience for customers and I'm excited about what's to come. Walmart 2017 Annual Report 5 Walmart U.S. In fiscal 2017, our focus on running great stores, being great merchants and delivering value and convenience produced continued momentum. Net sales increased to nearly $308 billion, up 3.2 percent, with comp sales* growth of 1.4 percent. Investments in store experience, quality, price and convenience are resonating with customers. We ended the year with nine consecutive quarters of traffic growth in our stores, and e-commerce sales are growing rapidly. Executing a winning strategy Running great stores Customer experience scores continued to improve as associates remained laser-focused on delivering a clean, fast and friendly shopping experience. We've invested to increase associate pay and training, simplify processes and add new technologyincluding tablets and handheldsto better equip associates to efficiently serve customers in a fast and friendly way. Our stores are cleaner, with better in-stock levels and significant improvement in inventory management. Train and grow 6 Walmart 2017 Annual Report Associates are on the front lines interacting with customers on a daily basis. So we're doing more to invest in associate training and development, including 200 new training academies, connected to existing supercenters, that provide hands-on training to further develop important skills needed in today's retail environment. By the end of 2017, more than 225,000 associates will have received this valuable training. *4-5-4 retail calendar comp sales for the 52-week period ending January 27, 2017. Walmart was built on a foundation of saving customers moneyit helps us become the most trusted retailerand today we remain deeply committed to everyday low prices. To deliver on this promise, we're focused on driving everyday low cost (EDLC) through cost of goods savings and supply chain efficiencies, and by increasingly leveraging technology to change how we work. These savings help fund a portion of our multiyear strategy of incremental price investment to reinforce our customer value proposition. Walmart U.S. Delivering value Being great merchants Assortment is the lifeblood of retailit drives traffic, sales and brand excitement. We're using data and analytics to tailor our assortment for customersboth what's on their shopping list and what they didn't know they needed. We've seen strength in key traffic-driving categories like grocery and health & wellness. Customers are responding to the improvements in fresh quality and presentation, as well as private brand quality, innovation and broader assortment. Providing convenience We're committed to saving customers time. Only Walmart can deliver a seamless shopping experience at scale by combining the power of stores with digital innovation. Customers love the convenience of Online Grocery, now available in over 600 stores, with more than 500 additional locations coming in fiscal 2018. Innovations like Walmart Pay and pharmacy express lanes make checkout fast and easy in our stores. And, with our free 2-day shipping offer, customers can place an order of $35 or more on Walmart.com and have it delivered to their doorstep within two days, without needing a membership. Steady improvement in comparable sales* 2.0 1.5 1.5% 1.5% 1.1% 1.0 1.8% 1.6% 1.0% 1.2% 0.6% 0.5 0.0 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 *4-5-4 retail calendar comp sales for the respective 13-week periods. Walmart 2017 Annual Report 7 Walmart International International On a constant currency basis, Walmart International delivered solid, broad-based topline results in fiscal 2017. Net sales grew 3 percent and ten of our 11 markets posted comp sales gains, led by Walmex with strong comps of over 7 percent. In addition, operating income grew faster than sales. Walmart International has a clear strategy to become the world's leading digitally-enabled food retailer. Solid strategy, steady execution Actively manage the portfolio In order to grow our business profitably, we're making strategic choices to simplify our portfolio and be more focused. For example, we've sold non-core assets like shopping malls in Chile and the Suburbia clothing chain in Mexico. Our emphasis for capital allocation is on our core North American markets (Mexico & Canada) and key growth markets (China & India). We are intentionally focused on investing in markets, channels, and formats that position us to win. Disciplined growth through differentiated customer proposition We are focused on expanding price leadership, driving private brand penetration, and continually improving our fresh offering. In addition, e-commerce will be a key growth engine in the future, and we are rapidly developing our capabilities in this area, including the use of alliances such as the one recently completed with JD.com in China. Be the lowest cost operator We're deeply committed to being the lowest cost operator. By driving savings through our cost analytics program in areas such as sourcing, supply chain, and operational efficiencies, we can fund growth and lower prices for customers. We've increased our vertical integration, improved logistics and leveraged new data tools to expand our cost advantage. Build strong foundations We are increasingly focused on training and developing world-class talent throughout our markets and empowering them to lead us into the next generation of retail. This year several leaders received new CEO appointments within various countries across our portfolio. In addition, International continues to serve as an exporter of officer-level talent to the U.S. businesses. Whether through automation, analytics, or mobile payment solutions, we will also continue to digitally transform our business. As always, we remain committed to being the most trusted retailer in the world. 8 Walmart 2017 Annual Report Sam's Club Transforming to serve members Club Pickup, with enhanced features for members, grew 31 percent in fiscal 2017 Our work to run great clubs and provide members with new and innovative ways to shop for exciting merchandise drove fiscal 2017 net sales growth of 0.9 percent, including comp sales* growth without fuel of 1.1 percent. Membership income increased more than 2 percent versus last year. A focus on product We're focused on exciting the member with unique and quality merchandise at an unbelievable value every time they visit the club. That means new brands and innovative items, as well as elevated fresh and organic offerings. We're investing in price to reinforce our value proposition. In addition, we're building loyalty around the value and quality of our private brand, Member's Mark, and adding new items to our assortment under this label. Over the past year, more than 90 percent of members purchased at least one private-brand item. Attracting and retaining members We're increasingly leveraging technology and data to target prospective members, attract them to the club and then retain them by delivering personalization at scale. We want to grow our membership and increase spend per member. We've diversified our payment options, including launching acceptance of American Express this past year, to drive small business member growth. Our Plus membership, Cash Rewards and Sam's Club 5-3-1 credit programs deliver added value that resonates with members. The leading digital experience We've differentiated ourselves in the membership club channel by moving quickly to offer a seamless shopping experience. In-club convenience reached a new level with the rollout of Scan & Go, which allows members to scan items as they shop and then pay using their smart phone, without having to stop at the register. Scan & Go users visit the club more and spend more than non-users. E-commerce growth has also been robust. And Club Pickup, with enhanced features like mobile check-in and pre-payment, grew 31 percent. At many locations, members don't even have to set foot in the club to receive their order. *4-5-4 retail calendar comp sales for the 52-week period ending January 27, 2017. Walmart 2017 Annual Report 9 Our associates: Moving faster to win the future 2.3 million Dedicated associates globally 75% of our U.S. store management teams started as hourly associates $2.7 billion We invested in the U.S. over the past two years in education, higher wages and training 250,000 We plan to hire discharged U.S. veterans by 2020 Our U.S. Academy training and development program will associates graduate by the end of 2017 225,000 10 Walmart 2017 Annual Report Walmart's investment in American Jobs Initiative Investing in American jobs Walmart is committed to purchasing an additional $250 billion in products that support American jobs between 2013 and 2023. Projected to create an estimated 1 million new U.S. jobs Through Walmart's U.S. manufacturing initiative, the U.S. could see direct manufacturing job growth of about 250,000, and about 750,000 in the support and service sectors.* *According to a Boston Consulting Group 2013 Study \"\u0007Walmart currently sources products from all 50 states.\" Awarded $10 million in grants Completed the $10 million U.S. Manufacturing Innovation Fund commitment, launched in 2014 by Walmart and the Walmart Foundation to fund manufacturing innovation. Walmart 2017 Annual Report 11 Strategic, independent, transparent: Our formula for strong governance The transformation of Walmart is gaining momentum, and the Board of Directors is confident that we have the right strategy to position the business for sustainable growth and shareholder returns in this new era of retail. Today's customer has more time pressures than ever, and our focus on making life easier for busy families is critical. Walmart is uniquely positioned to deliver on that goal. Strategic choices like the acquisition of Jet.com, the alliance with JD.com, and our rapid expansion of Online Grocery and marketplace, are intended to accelerate e-commerce growth and improve our digital capabilities for customers. We've also increased U.S. associate wages and enhanced training to elevate the customer experience in our stores. The investments have been significant, and the Board has been deeply engaged in these strategic decisions that accelerate our pace of change. Walmart is advantaged with an excellent Board with broadbased skill sets, diversity and business expertise. With strong independent perspectives, the directors play a vital role in the oversight of our strategy, and we're committed to fully leveraging their talents. Management is changing the way they work to move with speed. Similarly, we've taken steps to make the Board more nimble. Last year, we reduced the size of the Board from 15 to 12 members to facilitate quicker decision making, while maintaining its independence. We're committed to Board effectiveness. Our Lead Independent Director, Dr. James Cash, oversees an annual self-evaluation process of the Board and its committees. Directors provide feedback through detailed questionnaires and one-on-one interviews. This process helps identify gaps in director skill sets that may exist on the Board. Additionally this past year, our self-assessment led to changing the structure of our Board committees. Previously, a single committee was devoted to the broad scope of executive compensation, director nominations and governance. Those responsibilities have now been divided between two committees: the Compensation and Management Development Committee 12 Walmart 2017 Annual Report and the Nominating and Governance Committee. This allows greater focus on management development as well as Board recruitment and refreshment. We place a high priority on Board refreshment. This helps ensure a fresh perspective and a diverse mix of skillsets, experiences and tenures. In fact, over the past five years, we've added seven new directors to our Board. The Walton family's representation on the Board has also changed. Historically, three family members have held director positions on the Board. Upon Jim Walton's retirement last year, we were pleased to have his son Steuart join the Board, and he's already been a terrific contributor to our discussions. Our Board values shareholder perspectives. This past fall, management completed an extensive engagement process with most of our largest institutional shareholders to better understand their perspectives on important topics such as corporate strategy, governance and compensation. Shareholders generally supported Walmart's strategic investments, viewing them as critical in the competitive environment, and felt the adjustments made to Board structure will foster efficient decision making. Shareholders challenged the Board to regularly consider skill sets needed to drive growth in digital retail when recruiting new directors, and also to continually monitor if management's compensation program effectively rewards performance while aligning to shareholder interests. Thank you for being a shareholder. I'm excited about the speed with which Walmart is changing to become an even stronger company that builds sustainable value. Walmart is well-positioned to drive growth and shareholder returns for many years to come. Greg Penner Chairman of the Board For more information, please see our 2017 proxy and we ask you to vote your shares. Board of Directors James I. Cash, Jr., Ph.D. (Lead Independent Director) Gregory B. Penner (Chairman) Mr. Penner is the Chairman of the Board of Directors of Wal-Mart Stores, Inc. and a General Partner at Madrone Capital Partners, an investment firm. Dr. Cash is the James E. Robison Professor of Business Administration, Emeritus at Harvard Business School, where he served from July 1976 to October 2003. Pamela J. Craig Steven S Reinemund Ms. Craig is the retired Chief Financial Officer of Accenture plc, a global management consulting, technology services, and outsourcing company. Mr. Reinemund is the retired Dean of Business and Professor of Leadership and Strategy at Wake Forest University. He previously served as the Chairman of the Board and Chairman and Chief Executive Officer of PepsiCo, Inc. Timothy P. Flynn Kevin Y. Systrom Mr. Flynn is the retired Chairman of KPMG International, a professional services firm. Mr. Systrom is the Chief Executive Officer and co-founder of Instagram, a social media application. Thomas W. Horton S. Robson Walton Mr. Horton is the former Chairman of American Airlines Group Inc. and the former Chairman of American Airlines, Inc. He also previously served as the Chairman and Chief Executive Officer of AMR Corporation and CEO of American Airlines, Inc. Mr. Walton is the retired Chairman of the Board of Directors of Wal-Mart Stores, Inc. Marissa A. Mayer Steuart L. Walton Ms. Mayer is the Chief Executive Officer and President and Director of Yahoo!, Inc., a digital media company. Steuart L. Walton is the chief executive officer of Game Composites, Ltd., a company he founded in 2013 that designs and builds small composite aircraft. C. Douglas McMillon Linda S. Wolf Mr. McMillon is the President and Chief Executive Officer of Wal-Mart Stores, Inc. Ms. Wolf is the retired Chairman of the Board of Directors and Chief Executive Officer of Leo Burnett Worldwide, Inc., an advertising agency and division of Publicis Groupe S.A. Board Committees: Name Compensation & Strategic Management Nominating & Global Planning Technology & Audit Development Governance Executive Compensation & Finance e-commerce James I. Cash, Jr., Ph.D.(FE) Compensation & Strategic Management Nominating & Global Planning Technology & Audit Development Governance Executive Compensation & Finance e-commerce Name Gregory B. Penner(*) (C) Pamela J. Craig Steven S Reinemund Timothy P. Flynn (FE) Kevin Y. Systrom (C) Thomas W. Horton(FE) (C) S. Robson Walton Marissa A. Mayer C. Douglas McMillon (C) Steuart L. Walton (C) (C) Linda S. Wolf * Chairman ( ) (C) (C) Committee Chair (FE) Financial Expert Walmart 2017 Annual Report 13 We're uniquely positioned for customers and shareholders It's a transformative time in retail. With today's technology, customers have more connected lives and are more empowered than ever before to drive changes in shopping behavior. At Walmart, we're leveraging our financial strength and making strategic choices to accelerate change so we will win with customers in this new age of retail. Walmart's exceptionally strong financial position is unique. In fiscal 2017: annual revenue approached $486 billion with operating income of approximately $22.8 billion; operating cash flow reached a record level of $31.5 billion and return on investment* was 15.2 percent; we operated nearly 11,700 stores serving more than 260 million customers a week; we made several strategic transactions, including the acquisition of Jet.com and the alliance with JD.com; and we returned $14.5 billion to shareholders through dividends and share repurchases. The strength of our company gives us both the resources to win long term, and the flexibility in how we win and generate shareholder returns. Our path forward is underpinned by a financial framework with three priorities: strong, efficient growth; operating discipline; and strategic capital allocation. Strong, Efficient Growth: Historically, new stores have been the key contributor to Walmart's growth. Going forward, more growth will come from comp sales at existing stores. By leveraging technology, executing more frequent remodels and providing more sophisticated training to our associates, we'll deliver a better experience to customers. We plan to open fewer stores overall, particularly in the U.S., which should improve our returns on capital over time. We're also focused on accelerating e-commerce sales through our growing family of brands and the rapid expansion of marketplace, which can benefit the profitability mix of e-commerce. \"The strength of our company gives us both the resources to win long term, and the flexibility in how we win and generate shareholder returns.\" Financial priorities Strong, efficient growth Operating discipline Strategic capital allocation *\u0007Return on investment is a non-GAAP measure. Reconciliations and other information regarding return on investment and its closest GAAP measure, return on assets, can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report. 14 Walmart 2017 Annual Report Sharpening our focus on capital allocation In fiscal 2018, we plan to allocate more capital to remodels, e-commerce, technology and logistics and allocate less to new stores and clubs. FY15 Total capex spending: $12.2 billion New stores and clubs Remodels and customer initiatives Operating Discipline: We're keenly focused on being the lowest cost operator. We've made good progress in cost of goods efficiencies and working capital productivity with strong inventory management. There's more work to do in managing SG&A expenses. The strategic investments we made over the past two years in associates and technology were important to the long-term health of the business. We must be more efficient. We're taking steps to remove excess costs from the system and to change how we work in order to rejuvenate the EDLC culture of our heritage. We're also investing in technology to deploy resources more efficiently and leaning into shared services to centralize processes where appropriate. Strategic Capital Allocation: Capital expenditures for new stores and clubs have been meaningfully reduced over the past few years. We're focused on strategic initiatives that will drive long-term value, including store remodels and customer initiatives. The goal: keep our valuable store fleet fresh and improve our customer proposition, with enhancements to in-store pickup, Online Grocery and the fresh food business. In addition, we'll continue to invest in e-commerce and the technology of the future to deliver the convenience customers expect. FY18 Total projected capex spending: ~$11 billion E-commerce and technology Logistics, maintenance and other We've also been opportunistic on the M&A front with acquisitions of Jet.com, ShoeBuy, Moosejaw and ModCloth, as well as the alliance with JD.com, that help accelerate e-commerce growth in the U.S. and China. We'll be thoughtful about our portfolio of assets and, where appropriate, we'll continue to sharpen our focus through divestitures. We're confident that over time, these financial priorities will help us drive sustainable top line and bottom line growth, and generate solid returns for shareholders. In closing, I believe Walmart is uniquely positioned for long-term success. Our financial strength has allowed us to make investments in the right places to provide solutions for busy customers. We're laser-focused on the customer and moving with speed to position Walmart to win the future of retail for customers and shareholders. Brett Biggs Executive Vice President and Chief Financial Officer, Wal-Mart Stores, Inc. Walmart 2017 Annual Report 15 Walmart by the numbers $58 billion returned to shareholders through dividends and share repurchases, last 5 years $485.9 billion Total revenue fiscal 2017 We serve more than 260 million customers a week $31.5 billion Operating cash flow fiscal 2017 $39 billion in revenue growth, last 5 years 44 Consecutive years of annual dividend increases We operate 11,695 stores in 28 countries and e-commerce websites in 11 countries 16 Walmart 2017 Annual Report 2017 Financials 18 Five-Year Financial Summary 19\t\u0007 Management's Discussion and Analysis of Financial Condition and Results of Operations 36\t\u0007 Consolidated Statements of Income 37\t\u0007 Consolidated Statements of Comprehensive Income 38\t\u0007 Consolidated Balance Sheets 39\t\u0007 Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest 40\t\u0007 Consolidated Statements of Cash Flows 41\t\u0007\u0007Notes to Consolidated Financial Statements 60\t\u0007 Report of Independent Registered Public Accounting Firm 61\t\u0007 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting 62\t\u0007 Management's Report to Our Shareholders 63\t\u0007 Unit Counts as of January 31, 2017 64\t\u0007 Corporate and Stock Information Daniel J. Bartlett Executive Vice President, Corporate Affairs M. Brett Biggs Executive Vice President, Chief Financial Officer Jacqueline P. Canney Executive Vice President, Global People David Cheesewright Executive Vice President, President and CEO, Walmart International David M. Chojnowski Senior Vice President and Controller Greg S. Foran Executive Vice President, President and CEO, Walmart U.S. John Furner Executive Vice President, President and CEO, Sam's Club Jeffrey J. Gearhart Executive Vice President, Global Governance and Corporate Secretary Marc Lore Executive Vice President, President and CEO, Walmart eCommerce U.S. C. Douglas McMillon President and CEO Walmart 2017 Annual Report 17 Five-Year Financial Summary As of and for the Fiscal Years Ended January 31, (Amounts in millions, except per share and unit count data) Operating results Total revenues Percentage change in total revenues from previous fiscal year Net sales Percentage change in net sales from previous fiscal year Increase (decrease) in calendar comparable sales(1) in the United States Walmart U.S. Sam's Club Gross profit margin Operating, selling, general and administrative expenses, as a percentage of net sales Operating income Income from continuing operations attributable to Walmart Net income per common share: Diluted income per common share from continuing operations attributable to Walmart Dividends declared per common share Financial position Inventories Property, equipment, capital lease and financing obligation assets, net Total assets Long-term debt and long-term capital lease and financing obligations (excluding amounts due within one year) Total Walmart shareholders' equity Unit counts(2) Walmart U.S. segment Walmart International segment Sam's Club segment Total units 2017 2016 2015 2014\t2013 $485,873 $482,130\t$485,651\t$476,294\t$468,651 0.8% (0.7)%\t2.0%\t1.6%\t5.0% $481,317 $478,614\t$482,229\t$473,076\t$465,604 0.6% (0.7)%\t1.9%\t1.6%\t5.0% 1.4% 0.3%\t0.5% (0.5)%\t2.4% 1.6% 1.0%\t0.6% (0.6)%\t2.0% 0.5% (3.2)%\t0.0%\t0.3%\t4.1% 24.9% 24.6%\t24.3%\t24.3%\t24.3% 21.2% 20.3%\t19.4%\t19.3%\t19.0% $ 22,764 $24,105 $27,147 $26,872 $27,725 13,643 14,694\t16,182\t15,918\t16,963 $4.38 $4.57 $4.99 $4.85 $5.01 2.00 1.96\t1.92\t1.88\t1.59 $43,046 $44,469 $45,141 $44,858 $43,803 114,178 116,516\t116,655\t117,907\t116,681 198,825 199,581\t203,490\t204,541\t202,910 42,018 44,030\t43,495\t44,368\t41,240 77,798 80,546\t81,394\t76,255\t76,343 4,672 4,574\t4,516\t4,203\t4,005 6,363 6,299\t6,290\t6,107\t5,783 660 655\t647\t632\t620 11,695 11,528\t11,453\t10,942\t10,408 (1) C \u0007 omparable sales include sales from stores and clubs open for the previous 12 months, including remodels, relocations and expansions, as well as e-commerce sales. Comparable store and club sales include fuel. (2) \u0007Unit counts related to discontinued operations have been removed from all relevant periods. 18 Walmart 2017 Annual Report Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Wal-Mart Stores, Inc. (\"Walmart,\" the \"Company\" or \"we\") is engaged in retail and wholesale operations in various formats around the world. Through our operations, we help people around the world save money and live betteranytime and anywherein retail stores or through our e-commerce and mobile capabilities. Through innovation, we are striving to create a customer-centric experience that seamlessly integrates digital and physical shopping and saves time for our customers. Physical retail encompasses our brick and mortar presence in each of the markets in which we operate. Digital retail is comprised of our e-commerce websites and mobile commerce applications. Each week, we serve over 260 million customers who visit our 11,695 stores under 59 banners in 28 countries and e-commerce websites in 11 countries. Our strategy is to lead on price, invest to differentiate on access, be competitive on assortment and deliver a great experience. By leading on price we earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices (\"EDLP\"). EDLP is our pricing philosophy under which we price items at a low price every day so our customers trust that our prices will not change under frequent promotional activity. Price leadership is core to who we are. Everyday low cost (\"EDLC\") is our commitment to control expenses so our cost savings can be passed along to our customers. Our digital and physical presence, which we are investing in to integrate, provides customers access to our broad assortment anytime and anywhere. We strive to give our customers and members a great digital and physical shopping experience. The following examples illustrate the pursuit of our strategy to create a customer-centric experience that seamlessly integrates digital and physical shopping: \u0007In September 2016, we completed the acquisition of Jet.com, Inc. (\"jet.com\"), a U.S. based e-commerce company. The total purchase price for the acquisition was $2.4 billion, net of cash acquired. The preliminary allocation of the purchase price includes $1.7 billion in goodwill and $0.6 billion in intangible assets. As part of the transaction consideration, we will pay additional amounts accounted for as compensation of approximately $0.8 billion over a five year period, including approximately $0.5 billion in cash and approximately $0.3 billion in equity. The impact on fiscal 2017 net sales and operating income as a result of the acquisition was not significant. The acquisition of jet.com is in line with the Company's strategic framework of accelerating e-commerce growth. Our operations consist of three reportable segments: Walmart U.S., Walmart International and Sam's Club. \u0007In June 2016, we announced our strategic alliance with JD.com, Inc. (\"JD\") and the sale to JD of certain assets relating to Yihaodian, our e-commerce operations in China, including the Yihaodian brand, website and application in exchange for approximately 5 percent of JD's outstanding ordinary shares on a fully diluted basis. The sale resulted in the recognition of a $535 million noncash gain in our International segment, which gain is included in membership and other income in the accompanying Consolidated Statements of Income. Subsequently, during fiscal 2017, the Company purchased $1.9 billion of additional JD shares classified as available for sale securities, representing an incremental ownership percentage of approximately five percent, for a total ownership of approximately ten percent of JD's outstanding ordinary shares. \u0007Walmart U.S. is our largest segment with three primary store formats, as well as digital retail. Of our three reportable segments, Walmart U.S. has historically had the highest gross profit as a percentage of net sales (\"gross profit rate\"). In addition, it has historically contributed the greatest amount to the Company's net sales and operating income. Each of our segments contributes to the Company's operating results differently. Each, however, has generally maintained a consistent contribution rate to the Company's net sales and operating income in recent years other than minor changes to the contribution rate for the Walmart International segment due to fluctuations in currency exchange rates. \u0007Walmart International consists of our operations outside of the U.S. and includes retail, wholesale and other businesses. These businesses consist of numerous formats, including supercenters, supermarkets, hypermarkets, warehouse clubs, including Sam's Clubs, cash & carry, home improvement, specialty electronics, apparel stores, drug stores and convenience stores, as well as digital retail. The overall gross profit rate for Walmart International is lower than that of Walmart U.S. primarily because of its merchandise mix. Walmart International is our second largest segment and has grown through acquisitions, as well as by adding retail, wholesale and other units, and expanding digital retail. \u0007Sam's Club consists of membership-only warehouse clubs as well as digital retail. As a membership-only warehouse club, membership income is a significant component of the segment's operating income. Sam's Club operates with a lower gross profit rate and lower operating expenses as a percentage of net sales than our other segments. Our fiscal year ends on January 31 for our U.S. and Canadian operations. We consolidate all other operations generally using a one-month lag and on a calendar year basis. Our business is seasonal to a certain extent due to calendar events and national and religious holidays, as well as weather patterns. Historically, our highest sales volume and operating income have occurred in the fiscal quarter ending January 31. This discussion, which presents our results for the fiscal years ended January 31, 2017 (\"fiscal 2017\"), January 31, 2016 (\"fiscal 2016\") and January 31, 2015 (\"fiscal 2015\") should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion provides information about the financial results of the three segments of our business to provide a better understanding of how each of those segments and its results of operations affect the financial condition and results of operations of the Company as a whole. Walmart 2017 Annual Report 19 Management's Discussion and Analysis of Financial Condition and Results of Operations Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss segment operating income, comparable store and club sales and other measures. Management measures the results of the Company's segments using each segment's operating income, including certain corporate overhead allocations, as well as other measures. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation. Comparable store and club sales is a metric that indicates the performance of our existing U.S. stores and clubs by measuring the change in sales for such stores and clubs, including e-commerce sales, for a particular period from the corresponding period in the previous year. Walmart's definition of comparable store and club sales includes sales from stores and clubs open for the previous 12 months, including remodels, relocations, expansions and conversions, as well as e-commerce sales. We measure the e-commerce sales impact by including those sales initiated through websites and mobile commerce applications and fulfilled through our e-commerce distribution facilities, as well as an estimate for sales initiated online and on our mobile commerce applications, but fulfilled through our stores and clubs. Sales of a store that has changed in format are excluded from comparable store and club sales when the conversion of that store is accompanied by a relocation or expansion that results in a change in the store's retail square feet of more than five percent. Additionally, sales related to e-commerce acquisitions are excluded until such acquisitions have been owned for 12 months. Comparable store and club sales are also referred to as \"same-store\" sales by others within the retail industry. The method of calculating comparable store and club sales varies across the retail industry. As a result, our calculation of comparable store and club sales is not necessarily comparable to similarly titled measures reported by other companies. In discussing our operating results, we use the term \"currency exchange rates\" to refer to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar into U.S. dollars for financial reporting purposes. We calculate the effect of changes in currency exchange rates from the prior period to the current period as the difference between current period activity translated using the current period's currency exchange rates, and current period activity translated using the comparable prior year period's currency exchange rates. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. Volatility in currency exchange rates may impact the results, including net sales and operating income, of the Company and the Walmart International segment in the future. 20 Walmart 2017 Annual Report The Retail Industry We operate in the highly competitive retail industry in all of the markets we serve. We face strong sales competition from other discount, department, drug, dollar, variety and specialty stores, warehouse clubs and supermarkets, as well as e-commerce and catalog businesses. Many of these competitors are national, regional or international chains or have a national or international online presence. We compete with a number of companies for prime retail site locations, as well as in attracting and retaining quality employees (whom we call \"associates\"). We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, cost of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor costs, tax rates, cybersecurity attacks and unemployment. Further information on the factors that can affect our operating results and on certain risks to our Company and an investment in its securities can be found under \"Item 1A. Risk Factors\" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017, and in the discussion under \"Cautionary Statement Regarding Forward-Looking Statements and Information\" in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017. Company Performance Metrics We are committed to helping customers save money and live better through everyday low prices, supported by everyday low costs. At times, we adjust our business strategies to maintain and strengthen our competitive positions in the countries in which we operate. For several years, our performance metrics emphasized three financial priorities: growth, expense leverage and returns. We are currently making strategic investments in our associates and in the integration of digital and physical retail. These investments support long-term growth while we maintain our heritage of everyday low prices which are supported by everyday low cost. During this time of increased investments, we are focused primarily on growth, balanced by the long-term health of the Company including expense leverage and returns. Although we will continue to grow through new stores and clubs, our growth going forward will rely more on increasing comparable store and club sales and accelerating e-commerce sales growth. Our objective of balancing growth with returns means that we are focused on efficiently employing assets for return on investment and more effectively managing working capital to deliver strong free cash flow. We plan to provide returns to our shareholders through share repurchases and dividends. Management's Discussion and Analysis of Financial Condition and Results of Operations Growth We measure our growth primarily by the amount of the period-over-period growth in our net sales and our comparable store and club sales, which include the impact of e-commerce sales. At times, we make strategic investments which are focused on the long-term growth of the Company. These strategic investments may not benefit net sales and comparable store and club sales in the near term. Net Sales Fiscal Years Ended January 31, (Amounts in millions) 2017 2016 Net Sales 2015 Percent\tPercent Percent Percent Percent of Total Change Net Sales of Total Change Net Sales of Total Walmart U.S. Walmart International Sam's Club $307,833 64.0%\t3.2% $298,378 62.3%\t3.6% 116,119 24.1%\t(5.9)% 123,408 25.8%\t(9.4)% 57,365 11.9%\t0.9% 56,828 11.9%\t(2.1)% $288,049 59.8% 136,160 28.2% 58,020 12.0% Net sales $481,317\t100.0% 0.6% $478,614 100.0%\t(0.7)% $482,229 100.0% Our consolidated net sales increased $2.7 billion or 0.6% for fiscal 2017 and decreased $3.6 billion or 0.7% for fiscal 2016, when compared to the previous fiscal year. Net sales for fiscal 2017 were positively impacted by overall positive comparable sales and e-commerce sales and the 1.3% year-over-year growth in consolidated retail square feet. The positive effect of such factors was partially offset by a negative impact of $11.0 billion or 2.3% as a result of fluctuations in currency exchange rates and a $0.4 billion decrease in fuel sales from lower fuel prices at the Sam's Club segment. Net sales for fiscal 2016 were negatively impacted by $17.1 billion or 3.5% as a result of fluctuations in currency exchange rates and a $1.9 billion decrease in fuel sales from lower fuel prices at the Sam's Club segment. The negative effect of such factors was partially offset by 1.3% year-over-year growth in retail square feet, positive comparable sales in the Walmart U.S. segment and higher e-commerce sales across the Company. Calendar Comparable Store and Club Sales Comparable store and club sales is a metric which indicates the performance of our existing U.S. stores and clubs by measuring the change in sales for such stores and clubs, including e-commerce sales, for a particular period over the corresponding period in the previous year. The retail industry generally reports comparable store and club sales using the retail calendar (also known as the 4-5-4 calendar). To be consistent with the retail industry, we provide comparable store and club sales using the retail calendar in our quarterly earnings releases. However, when we discuss our comparable store and club sales below, we are referring to our calendar comparable store and club sales calculated using our fiscal calendar. As our fiscal calendar differs from the retail calendar, our fiscal calendar comparable store and club sales also differ from the retail calendar comparable store and club sales provided in our quarterly earnings releases. Calendar comparable store and club sales, as well as the impact of fuel, for fiscal 2017 and 2016, were as follows: Fiscal Years Ended January31, 2017 2016 With Fuel 2017\t2016 Fuel Impact Walmart U.S. Sam's Club 1.6%\t1.0% 0.0%\t0.0% 0.5%\t(3.2)% (0.9)%\t(3.4)% Total U.S. 1.4%\t0.3% (0.1)%\t(0.6)% Comparable store and club sales in the U.S., including fuel, increased 1.4% and 0.3% in fiscal 2017 and 2016, respectively, when compared to the previous fiscal year. The fiscal 2017 total U.S. comparable store and club sales were positively impacted by continued traffic improvement and higher e-commerce sales at the Walmart U.S. segment, partially offset by the negative impact of lower fuel sales primarily due to lower fuel prices at the Sam's Club segment. E-commerce sales positively impacted comparable sales approximately 0.4% and 0.7% for Walmart U.S. and Sam's Club, respectively, for fiscal 2017. The fiscal 2016 total U.S. comparable store and club sales were positively impacted by continued traffic improvement and higher e-commerce sales at the Walmart U.S. segment, offset to a significant degree by the negative impact of lower fuel sales from lower fuel prices at the Sam's Club segment. E-commerce sales positively impacted comparable sales approximately 0.2% and 0.6% for Walmart U.S. and Sam's Club, respectively, for fiscal 2016. As we continue to add new stores and clubs in the U.S., we do so with an understanding that additional stores and clubs may take sales away from existing units. We estimate the negative impact on comparable store and club sales as a result of opening new stores and clubs was approximately 0.7% and 0.8% in fiscal 2017 and 2016, respectively. Our estimate is calculated primarily by comparing the sales trends of the impacted stores and clubs, which are identified based on their proximity to the new stores and clubs, to those of nearby non-impacted stores and clubs, in each case, as measured after the new stores and clubs are opened. Walmart 2017 Annual Report 21 Management's Discussion and Analysis of Financial Condition and Results of Operations Returns While we are focused primarily on growth, we also place a priority on generating returns to ensure our approach is appropriately balanced. We generate returns by efficiently deploying assets and effectively managing working capital. We monitor these efforts through our return on investment and free cash flow metrics, which we discuss below. In addition, we are focused on providing returns to our shareholders in the form of share repurchases and dividends, which are discussed in the Liquidity and Capital Resources section. We include Return on Assets (\"ROA\"), the most directly comparable measure based on our financial statements presented in accordance with generally accepted accounting principles in the U.S. (\"GAAP\"), and Return on Investment (\"ROI\") as metrics to assess returns on assets. Return on Assets and Return on Investment Management believes ROI is a meaningful metric to share with investors because it helps investors assess how effectively Walmart is deploying its assets. Trends in ROI can fluctuate over time as management balances long-term potential strategic initiatives with possible short-term impacts. We consider ROA to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to our calculation of ROI. ROA was 7.2% and 7.5% for the fiscal years ended January 31, 2017 and 2016, respectively. ROI was 15.2% and 15.5% for the fiscal years ended January 31, 2017 and 2016, respectively. The declines in ROA and ROI were primarily due to our decrease in operating income over these periods. We define ROI as adjusted operating income (operating income plus interest income, depreciation and amortization, and rent expense) for the fiscal year or trailing 12 months divided by average invested capital during that period. We consider average invested capital to be the average of our beginning and ending total assets, plus average accumulated depreciation and average accumulated amortization, less average accounts payable and average accrued liabilities for that period, plus a rent factor equal to the rent for the fiscal year or trailing 12 months multiplied by a factor of eight. When we have discontinued operations, we exclude the impact of the discontinued operations. Our calculation of ROI is considered a non-GAAP financial measure because we calculate ROI using financial measures that exclude and include amounts that are included and excluded in the most directly comparable financial measure calculated and presented in accordance with GAAP. For example, we exclude the impact of depreciation and amortization from our reported operating income in calculating the numerator of our calculation of ROI. In addition, we include a factor of eight for rent expense that estimates the hypothetical capitalization of our operating leases. As mentioned above, we consider ROA to be the financial measure computed in accordance with GAAP that is the most directly comparable financial measure to our calculation of ROI. ROI differs from ROA (which is consolidated net income for the period divided by average total assets for the period) because ROI: adjusts operating income to exclude certain expense items and adds interest income; adjusts total assets for the impact of accumulated depreciation and amortization, accounts payable and accrued liabilities; and incorporates a factor of rent to arrive at total invested capital. Because of the adjustments mentioned above, we believe ROI more accurately measures how we are deploying our key assets and is more meaningful to investors than ROA. 22 Walmart 2017 Annual Report Although ROI is a standard financial metric, numerous methods exist for calculating a company's ROI. As a result, the method used by management to calculate our ROI may differ from the methods used by other companies to calculate their ROI. The calculation of ROA and ROI, along with a reconciliation of ROI to the calculation of ROA, the most comparable GAAP finan