Comparative Analysis Problem Amazon.com, Inc vs. Wal-Mart Stores Inc, accounting homework help

Sep 6th, 2017
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Question description

Purpose of Assignment

The purpose of this assignment is to evaluate the inventory section of two companies using basic comparative analysis, and to interpret the data to gain insight about the company's inventory management.

Assignment Steps

Resources: Appendices D and E located in Financial Accounting: Tools for Business Decision Making

Note: While the data are not from the same year, inferences can be drawn regarding inventory management of the two companies.

Write a 1,050-word comparative analysis using the financial statements of Amazon.com, Inc. presented in Appendix D, and the financial statements for Wal-Mart Stores, Inc., presented in Appendix E, including the following:

  • Compute the 2014 values for Amazon.com and the 2015 values for Wal-Mart based on the information in the financial statements:
    • Inventory turnover (Use cost of sales and inventories)
    • Days of inventory
  • Conclusions concerning the management of the inventory can you draw from this data.

Show work on Excel® spreadsheet and submit with analysis.

No plagiarism

Name Section Date Chapter 6 Comparative Analysis Problem 2 Amazon.com, Inc. vs. Wal-Mart Stores, Inc. (a) Amazon.com Inventory turnover: Days in inventory: (b) 377 Wal-Mart

Tutor Answer

(Top Tutor) fareeha27
School: Cornell University
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Here you go....Please let me know if you want me to change anything.

Running Head COMPARATIVE ANALYSIS PROBLEM: AMAZON.COM, INC. VS. WALMART STORES, INC.

1

Date
Comparative Analysis Problem: Amazon.com, Inc. vs. Wal-Mart Stores, Inc.
ACC 290
Instructor
Date

Comparative Analysis Problem: Amazon.com, Inc. vs. Wal-Mart Stores, Inc.

2

Comparative Analysis Problem: Amazon.com, Inc. vs. Wal-Mart Stores, Inc.
Introduction
Having an accurate valuation of inventory is important because the reported amount of
inventory will affect 1) the cost of goods sold, gross profit, and net income on the income
statement, and 2) the amount of current assets, working capital, total assets, and stockholders’ or
owner’s equity reported on the balance sheet. An incorrect inventory valuation will cause two
income statements to be incorrect. The reason is the ending inventory of one accounting period
will automatically become the beginning inventory in the subsequent accounting period
Inventory Turnover
How faster an organization is selling inventory, is measured by the inventory turnover,
which afterward is compared contrary to others in the same industry (Edwards, Hermanson, &
Maher, 2011). A low turnover would mean that sales are weak and would also mean that there
would be excess inventory. A high turnover would mean either large discounts or strong sales
and could also be both strong sales or large discounts. Having enough inventory is essential in
running a business such as Wal-Mart and Amazon as if there is too much or too little inventory
the company will lose money. It is very hard for any business to predict the correct amount of
inventory needed to be purchased but companies like Wal-Mart and Amazon seem to have
relatively the same system as their inventory turnover and days in inventory is relatively the
same figure.
Inventory turnover is equal to beginning inventory + ending inventory divided by 2. For
Wal-Mart and Amazon, they both had an inventory turnover of eight when rounded. However,
Wal-Mart did have the higher inventory turnover which would mean that Wal-Mart is doing
better than Amazon. This would be true because Wal-Mart is known for everyday low prices,

Comparative Analysis Problem: Amazon.com, Inc. vs. Wal-Mart Stores, Inc.

3

where Amazon people just by for the convenience of not leaving their house. Wal-Mart sells
more on a cash basis versus Amazon selling on a credit basis. A credit basis usually means that
there is less sales going on and also could mean that its debtors haven’t paid. By looking at the
reports you can see that it looks like Wal-Mart has a better control of their inventory purchases.
If a company orders to much inventory it will lose value as it sits, and therefore it is important to
sell the inventory quickly.
Days’ Sales in Inventory
It tells the user regarding the average number of days that are taken by the organization
with the intention of selling the average inventory held throughout the year. The calculation is
simple; to get the days’ dales in invento...

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