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Running head: AMAZON v. WALMART INC.
A comparative analysis of Walmart Inc. and Amazon
Course Number: Course Name
AMAZON v. WALMART INC.
A COMPARATIVE ANALYSIS OF WALMART INC. AND AMAZON
The use of financial statements is crucial in anyone seeking information on the
performance of any business. The profitability of an organization can be affected by its
management of inventory i.e. the length of time it takes to convert inventory into sales and the
amount of stock held at any given time. This paper aims at examining and comparing the
financial statements of two organizations; Amazon and Walmart Inc. with a particular focus on
the inventory management of these firms. The main ratios calculated and analyzed will be the
inventory turnover ratio and the days in inventory ratio.
Inventory Management Analysis
Based on the ratio calculations, Walmart Inc. has an inventory turnover ratio of 8.09
while Amazon’s is 7.56. The days in inventory ratio for Walmart is 45.12 which is approximated
to 46 days while Amazon is at 48.28 approximated as 49 days.
Inventory Turnover = Cost of Sales/inventory
Cost of sales:
Days of Inventory = Days in year/inventory
AMAZON v. WALMART INC.
Inventory Turnover Ratio
The inventory turnover ratio gives us an insight on a company’s efficiency. This ratio
illustrates how effective the management of inventory is through a comparison of cost of sales
with the annual inventory balances. It is a measure of the number of times a company’s
inventory is sold or ‘turned over ‘within the year. In our analysis, the inventory turnover ratio
was calculated by dividing the cost of sales by the inventory. Because this is a measure of
inventory control effectiveness, the higher a company’s ratio, the better. Therefore, by
comparing Walmart’s 8.09 and Amazon’s 7.56, we are able to deduct that Walmart is more
effective at managing its inventory as compared to Amazon because it has a higher ratio, though
the difference is very minimal. Walmart is able to get rid of its entire stock 8.06 times in the year
while amazon does this 7.56 times. This is an indication that Walmart does not spend too much
by purchasing unnecessary inventory which may result in storage of inventory that is not
moving. It is also an indication that the companies are able to effectively get rid of stock bought
The inventory turnover ratio also serves as an indication to the investors and potential
investors on the liquidity of the organization’s inventory. Inventory is considered to be amongst
the major assets ...
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