Below is one of three questions I'm having trouble with...

• Evaluate the sources and uses of cash for Wal-mart Stores Inc. including:
  • the major sources and uses of cash flow between operating, investing, and financing activities over the past five years;
  • significant determinants of operating cash flows;
  • significant determinants of investing cash flows; and
  • significant determinants of financing cash flows.

From your evaluation, is operating cash flow positive and sufficient to cover capital expenditures?

Download Wal-mart Stores Inc. financial statements by clicking on the Activities section in the left-hand menu, selecting the Wal-mart Resources folder, and finally clicking on the file Walmart Financial Statements Data. Your final product should consist of a Word document with Excel tables copied and pasted into the document. If needed, follow these instructions to copy an Excel solution as an Excel object and paste it into a Word document: Edit > Paste Special...>Microsoft Excel Worksheet Object. For more information, please see Microsoft's information on linking or embedding Excel worksheets (http://office.microsoft.com/en-us/word-help/link-or-embed-an-excel-worksheetHA010120810.aspx). Once you have completed answering the following questions upload your file to the assignment dropbox. Requirements: 1. Evaluate the sources and uses of cash for Wal-mart Stores Inc. including: (5 points) a. the major sources and uses of cash flow between operating, investing, and financing activities over the past five years; b. significant determinants of operating cash flows; c. significant determinants of investing cash flows; and d. significant determinants of financing cash flows. From your evaluation, is operating cash flow positive and sufficient to cover capital expenditures? 2. Common size statement analysis (5 points) a. Prepare a common size cash flow statement using net sales as the common size and keep 2 decimal places in the percentage, (for example, 12.43%). b. Are depreciation expenses and capital expenditure significant components in the cash flow statement percentagewise? Is that surprising? c. Percentagewise, is operating cash flow higher than net income? Is that good? d. Do operating cash flows meet the needs of investment and distribution? Provide your comment(s) on the trend of the answer to this question? 3. Cash flow ratios (10 points) Calculate free cash flow to the firm (FCFF) and free cash flow to the equity (FCFE). What is the firm's position of free cash flows over the past THREE years? Calculate performance ratios and coverage ratios for the past THREE years: cash flow to revenue; cash return on assets; cash return on equity; cash to income; debt coverage; and interest coverage. Keep three decimal places in ratio calculations, such as .182. How are the firm's cash performance, financial risk, and the ability to meet interest obligations according to those ratios over the past THREE years? Note: the results of FCFF and FCFE should not have any decimal places. For simplicity, use the tax paid in the cash flow statement as income tax expense; use interest paid in the cash flow statement as interest expense; use income from continuing operations before tax as pre-tax earnings; debt refers to both long-term debt and short-term debt, which include borrowings, debts, obligations and loans; use total Wal-mart shareholders' equity as shareholders' equity (not Total equity). Final product: Word document with Excel tables copied and pasted. Hints: 1. Determinants of cash flows. We examine determinants of operating cash flow to assess the quality of operating cash flow. Determinants are components. Specifically, we study the change of accounts of current assets and current liabilities and their impact on operating cash flow. Note that current assets and current liabilities are economic recourses and sacrifices to generate operating cash flow. Manufacturing and selling are usually major business operations of a firm and thus we need to scrutinize any cash flow related to them. For example, if a firm had an increase of A/R (more credit sales) and an increase of inventories (more unsold items), both of which tied up some cash and had negative impact on its ability to generate cash from business operations. Nonetheless, this firm was able to take advantage of free financing and conserve some cash, evidenced by an increase of A/P. Overall, its ability to generate cash from its business operations deteriorated in that year, as indicated by a net decrease of cash from those three accounts of the most important operating assets and liabilities. Investing cash flows: asset acquisitions indicate future growth opportunities while asset disposals may suggest the opposite. Evaluate those in the backdrop of macro-economy, life stage of the firm and the firm performance. For example, a cash-constrained firm may report an amount of asset disposals higher than that of asset acquisitions. In Millions, unless otherwise specified Cash flows from operating activities: Income from continuing operations Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization Deferred income taxes Other operating activities Changes in certain assets and liabilities, net of effects of acquisitions: Receivables, net Inventories Accounts payable Accrued liabilities Accrued income taxes Net cash provided by operating activities Cash flows from investing activities: Payments for property and equipment Proceeds from the disposal of property and equipment Investments and business acquisitions, net of cash acquired Other investing activities Net cash used in investing activities Cash flows from financing activities: Net change in short-term borrowings Proceeds from issuance of long-term debt Payments of long-term debt Dividends paid Purchase of Company stock Other financing activities Net cash used in financing activities Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period Income Taxes Paid, Net Interest Paid Consolidated Statements Of Cash Flows (Audited) (USD $) 2014 2013 2012 2011 2010 17,756 16,454 15,959 14,962 13,734 8,501 (133) 527 8,130 1,050 398 7,641 651 1,087 7,157 (504) 318 6,739 581 752 (614) (2,759) 1,061 271 981 25,591 (796) (3,727) 2,687 (935) 994 24,255 (733) (297) (3,205) 2,213 2,676 1,052 (280) 1,348 (153) 23,643 26,249 (101) (184) (410) 2,036 23,147 (12,898) 532 (316) 71 (12,611) (13,510) 580 (3,548) (131) (16,609) (12,699) (12,184) 489 1,002 (202) 219 (438) (12,193) (11,620) (11,499) 714 (1,576) 781 (10,742) 2,754 211 (1,478) (5,361) (7,600) (498) (11,972) 223 1,231 6,550 7,781 7,304 2,262 3,019 5,050 (4,584) (5,048) (6,298) (597) (8,458) (33) (845) 7,395 6,550 5,899 2,346 503 11,396 (4,080) (4,437) (14,776) (634) (12,028) 66 (512) 7,907 7,395 6,984 2,163 (3,745) 6,566 (5,387) (3,746) (3,521) (85) (9,918) (781) 1,706 5,569 7,275 6,596 1,787 (1,033) 5,546 (6,033) (4,217) (7,276) (1,178) (14,191) 194 632 7,275 7,907 7,389 2,141 Consolidated Statements Of Income (Audited) (USD $) In Millions, except Per Share data, unless otherwise specified Revenues: Net sales Membership and other Income Total revenues Costs and expenses: Cost of sales Operating, selling, general and administrative expenses Operating income Interest: Debt Capital leases Interest income Interest, net Income from continuing operations before income taxes Provision for income taxes Current Income Tax Expense Deferred Income Tax Expense Total provision for income taxes Income from continuing operations Loss from discontinued operations, net of income taxes Consolidated net income Less consolidated net income attributable to noncontrolling interest Consolidated net income attributable to Walmart Basic net income per common share: Basic income per common share from continuing operations attributable to Walmart Basic loss per common share from discontinued operations attributable to Walmart Basic net income per common share attributable to Walmart Diluted net income per common share: Diluted income per common share from continuing operations attributable to Walmart Diluted loss per common share from discontinued operations attributable to Walmart Diluted net income per common share attributable to Walmart Weighted-average common shares outstanding: Basic Diluted Dividends declared per common share 2014 12 Months Ended 2013 2012 2011 2010 $466,114 3,048 469,162 $443,854 3,096 446,950 $418,952 405,132 2,897 2,953 421,849 408,085 401,087 3,167 404,254 352,488 88,873 27,801 335,127 85,265 26,558 314,946 304,444 81,361 76,639 25,542 24,002 303,941 77,546 22,767 1,977 274 -187 2,064 25,737 2,034 288 -162 2,160 24,398 1,928 1,787 277 278 -201 -181 2,004 1,884 23,538 22,118 1,896 288 -284 1,900 20,867 7,999 -18 7,981 17,756 0 17,756 -757 $16,999 6,742 1,202 7,944 16,454 -67 16,387 -688 $15,699 6,703 7,643 876 -487 7,579 7,156 15,959 14,962 1,034 -79 16,993 14,883 -604 -513 $16,389 14,370 6,564 569 7,133 13,734 146 13,880 -499 13,381 $5.04 $0 $5.04 $4.56 ($0.02) $4.54 $4.20 $ 3.74 $0.28 $ (0.02) $4.48 $ 3.72 $ 3.36 $ 0.04 $ 3.4 $5.02 $0 $5.02 $4.54 ($0.02) $4.52 $4.18 $ 3.73 $0.29 $ (0.02) $4.47 $ 3.71 $ 3.35 $ 0.04 $ 3.39 3,374 3,389 $1.59 3,460 3,474 $1.46 3,656 3,866 3,670 3,877 $1.21 $ 1.09 3,939 3,951 $ 0.95 In Millions, unless otherwise specified Current assets: Cash and cash equivalents Receivables, net Inventories Prepaid Expense and Other Assets, Current Total current assets Property and equipment: Land Buildings and improvements Fixtures and equipment Transportation equipment Construction in process Property, Plant and Equipment, Gross Less accumulated depreciation Property and equipment, net Property under capital leases: Property under capital leases Less accumulated amortization Property under capital leases, net Goodwill Other assets and deferred charges Total assets Current liabilities: Short-term borrowings Accounts payable Accrued liabilities Accrued income taxes Long-term debt due within one year Obligations under capital leases due within one year Total current liabilities Long-term debt Long-term obligations under capital leases Deferred income taxes and other Redeemable noncontrolling interest Total liabilities Equity: Common stock Capital in excess of par value Retained earnings Accumulated other comprehensive income (loss) Total Walmart shareholders' equity Noncontrolling interest Total equity Total liabilities and equity 2014 Consolidated Balance Sheets (Audited) (USD $) 2013 2012 2011 2010 7,395 7,907 5,089 4,144 36,318 32,713 3,091 3,128 51,893 48,032 7,781 6,768 43,803 1,588 59,940 6,550 5,937 40,714 1,774 54,975 25,612 90,686 40,903 2,796 5,828 165,825 -51,896 113,929 23,499 84,275 39,234 2,682 5,312 155,002 -45,399 109,603 24,386 79,051 38,290 2,595 4,262 148,584 (43,486) 105,098 22,591 19,852 19,879 73,657 73,810 72,141 34,035 29,851 28,026 2,355 2,307 2,210 5,210 0 0 137,848 125,820 122,256 (38,304) (32,964) (28,531) 99,544 92,856 93,725 5,899 -3,147 2,752 20,497 5,987 203,105 5,936 -3,215 2,721 20,651 5,456 193,406 5,905 (3,125) 2,780 16,763 4,129 180,663 5,669 5,341 5,736 (2,906) (2,544) (2,594) 2,763 2,797 3,142 16,126 15,260 15,879 3,942 3,567 2,748 170,407 $163,429 $163,514 6,805 38,080 18,808 2,211 5,587 327 71,818 38,394 3,023 7,613 519 121,367 4,047 36,608 18,180 1,164 1,975 326 62,300 44,070 3,009 7,862 404 117,645 1,031 33,557 18,701 157 4,655 336 58,484 40,692 3,150 6,682 408 109,416 332 3,620 72,978 -587 76,343 5,395 81,738 $203,105 342 3,692 68,691 -1,410 71,315 4,446 75,761 $193,406 352 3,577 63,967 646 68,542 2,705 71,247 180,663 523 30,451 18,734 1,347 4,050 346 55,543 33,231 3,170 5,508 307 97,759 $7,275 3,905 34,511 3,063 48,949 2009 $1,506 28,849 18,112 677 5,848 315 55,390 31,349 3,200 6,014 2,191 98,144 $5,492 3,642 35,159 2,760 48,020 $5,040 30,344 15,725 1,000 5,913 316 58,478 29,799 3,603 5,087 1,939 98,906 378 393 397 3,803 3,920 3,028 66,357 63,660 57,319 (70) (2,688) 3,864 70,468 65,285 64,608 2,180 0 0 72,648 65,285 64,608 170,407 $163,429 $163,514