Part A

Walmart Stores $($Walmart$)$ is the world$$s largest retailer. It employs an $$everyday low price$$ strategy and operates stores as three business segments: Walmart U$.$S$.,$ International, and Sam$$s Club.

Walmart U$.$S$.$ Segment: This segment represented $67\%$ of all $2020$ sales and operates stores in three different formats: Discount stores $(106,000$ average square feet$),$ Supercenters $(178,000$ average square feet$),$ and Neighborhood Markets $(42,000$ average square feet$).$ Each format carries a variety of clothing, housewares, electronic equipment, pharmaceuticals, health and beauty products, sporting goods, and similar items, and Supercenters include a full$-$line supermarket. Walmart U$.$S$.$ stores are in all $50$ states; Washington, D$.$C$.$; and Puerto Rico. Customers also can purchase many items through the company$$s website at www$.$walmart.com.

Walmart International Segment: The International segment includes wholly owned subsidiaries in Canada, Chile, China, and Japan; majority$-$owned subsidiaries are in Africa, Central America, India and Mexico. The merchandising strategy for the International segment is similar to that of the Walmart U$.$S$.$ segment, but margins are lower due to its merchandise mix.

Sam$$s Club Segment: Sam$$s Clubs are membership club warehouses that operate in $48$ states. The average Sam$$s Club is approximately $134,000$ square feet, and customers can purchase many items through the company$$s website at www$.$samsclub.com. These warehouses offer bulk displays of brand name merchandise, including hard goods, some soft goods, institutional$-$size grocery items, and certain private$-$label items. Gross margins for Sam$$s Clubs stores are lower than those of the U$.$S$.$ and International segments.

Walmart uses centralized purchasing through its home office for substantially all of its merchandise. It distributes products to its stores through $156$ regional distribution centers located strategically throughout the United States and $221$ distribution centers located in other countries. Sam$$s Club merchandise flows through one of $27$ dedicated distribution facilities.

Exhibit $4\mathrm{.}42$ sets out various operating data for Walmart for $2018$ through $2020.$ Exhibit $4\mathrm{.}43$ presents segment data. Exhibit $4\mathrm{.}44$ presents comparative balance sheets for Walmart for $2017$ through $2020($an extra year to enable average balance computations when necessary$),$ Exhibit $4\mathrm{.}45$ presents comparative income statements for $2018$ through $2020,$ and Exhibit $4\mathrm{.}46$ presents comparative statements of cash flows for $2018$ through $2020.$ Exhibit $4\mathrm{.}47$ presents selected financial statement ratios for Walmart for $2018$ through $2020.$ With the exception of segment ratios, Walmart financial ratios include an adjustment for imputation of interest on operating leases based on Walmart$$s $2020$ disclosed weighted$-$average discount rate on operating leases of $6\mathrm{.}1\%.$ The statutory income tax rate is $21\%.($Please access the exhibits by clicking the link provided at the end of the assignment$)$

Required

What are the likely reasons for the changes in Walmart$$s rate of ROA during the three$-$year period? Analyze the financial ratios to the maximum depth possible.

What are the likely reasons for the changes in Walmart$$s rate of ROCE during the three$-$year period?

Note: Requirements c and d require coverage of material from Chapter $5.$

How has the short$-$term liquidity risk of Walmart changed during the three$-$year period?

How has the long$-$term solvency risk of Walmart changed during the three$-$year period?