Instructions:

Within Walmarts Annual Report, locate its financial statements beginning on page 53.

Within Amazons Annual Report, locate its financial statements beginning on page 36.

Download the Excel template and calculate the requested ratios for each companys most recent year-end only (that is, 2022 for Walmart and 2021 for Amazon). Please be careful to pick up the correct year as Amazon presents its results from oldest to most recent while Walmart presents its results from most recent to oldest.

1. Current ratio

2. Days inventory outstanding (DIO) (hint: both companies use the wording Cost of sales which is the same thing as Cost of goods sold)

3. Days sales outstanding (DSO) (hint: use total net sales for Amazon and net sales for Walmart for this calculation)

4. Days payable outstanding (DPO)

5. Debt ratio

6. Operating income percentage

7. Return on sales

8. Return on total assets (ROA) (hint: Use consolidated net income for Walmart and include interest expense relating to both debt and finance, capital lease and financing obligations for Walmart)

9. Return on equity (ROE) (hints: neither company has any preferred dividends. Use consolidated net income attributable to Walmart in the numerator and total Walmart shareholders equity in the denominator when calculating this ratio)

10. Price/Earnings Ratio (P/E Ratio) (hints: use a share price of $3,372.80 for Amazon and $139.81 for Walmart AND utilize the basic earnings per share information from each companys Consolidated Statements of Income/Operations)

Based on your analysis, answer the following questions (answers should be recorded in this document). Once complete, upload both this Word document and your Excel document into the Assignment 10-D folder on Moodle.

Based on your Ratio Analysis:

• 1. Which company is in a better position to pay its current liabilities (that is, stronger liquidity)? Explain how you know this.

- Amazon is in better position to pay its current liabilities as the current ratio of Amazon is more than Walmart.

• 2. Which company has a more favourable cash conversion cycle? Explain how you know this.
• - Amazon has more favourable cash conversion cycle.

The same can be analysed through following data: Walmart Amazon

Inventory 41.025 41.532

Receivable 4.4112 24.392

Less: Payable Days 43.5 94.1231

= 1.9467 -28.1997

A negative amount indicates that Amazon has higher days payable outstanding which gives the benefit to business having more favourable cash conversion cycle.

• 3. Which company has more debt in its overall capital structure (that is, more leveraged)? Explain how you know this.

- Amazon has higher debt structure in its capital structure. Approximately, 72.45% is the debt in the Amazon total Capital Structure.

• 4. Which company earns a higher percentage of profit from each sales dollar in its core business operations (that is, from its operating income)? Explain how you know this.

- Amazon has a higher operation net income of 5.18% as compared to Walmart which has operating net of 3.96%

• 5. Which company is generating the most net income based on sales? Explain how you know this.

- Amazon is generation the most net income based on sales. The ratio for amazon is 0.04, where as for Walmart, the ratio is 0.03

• 6. Which company is earning more based on each dollar of assets invested by both shareholders (owners) and creditors (lenders)? Explain how you know this.

- Amazon is earning 8.03% of income on total asset invested as compared to Walmart.

• 7. Which company is earning more based on every $1 invested by its common shareholders? Explain how you know this.

- Amazon has higher return on equity of 21.95% as compared to Walmart, where theyre return on equity is 20.22%

• 8. Compare the basic earnings per share (EPS) of these two companies which is disclosed on their Consolidated Statements of Income/Operations for the past 3 years.

Walmart Amazon

2022 __________

2021 __________ __________

2020 __________ __________

2019 __________

What does this ratio represent AND which company is currently outperforming the other?

• 9. Interpret each companys P/E ratio. That is, explain what each companys P/E ratio tells us.

• 10. Based on your analysis and review of each companys financial statements, do you see any red flags that cause you concern? (review the last slide of chapter 10 power point or page 578 of your textbook for a discussion of common signs of trouble or red flags in financial statements). For the ebook, this is at the end of the chapter

• 11. Based on all of your analysis, identify the company you feel is the better investment and justify your position.

• 12. If you could ask Doug McMillon, the CEO of Walmart one question so that you can made a better informed investment decision, what would that question be?

• 13. If you could ask Andy Jassy, the CEO of Amazon one question so that you could make a better informed investment decision, what would that question be?

• 14. Identify at least one limitation with respect to the ratio analysis you performed on this assignment. (suggestion: review p. 578 of your textbook for a discussion of possible limitations). For the ebook, this is at the end of the chapter