Description
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.
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Explanation & Answer
Attached.
Running head: FINANCIAL ANALYSIS
1
Financial Analysis
Name:
Institution:
Instructor:
Course:
Date:
FINANCIAL ANALYSIS
2
Introduction
Financial ratios are essential in evaluating the financial performance of any company.
Businesses use them for different reasons such as analyzing if the company is capable of meeting
the short and long-term liabilities whenever they occur (Brigham & Ehrhardt, 2017). They also
help a business to gauge its performance and competitive edge in the industry. When evaluating
them, chief financial officers can measure the financial performance of the corporation over a
period, i.e. in different quarters. However, they also have limitations since they do not take into
account the effects of economic indicators such as inflation. For example, increased sales may be
a result of increasing the selling price because of inflationary pressure.
Financial Statements
(a)
Amazon
Walmart
(1) Inventory turnover:
Cost of sales
62752
Cost of sales
365,086
2013 inventory
7411
2014 inventory
44,858
2014 inventory
8299
2015 inventory
45,141
Average inventory
7855
Average inventory
44,999.5
Inventory turnover
7.99
Inventory turnover
8.113
(2) Days in inventory:
FINANCIAL ANALYSIS
3
No of days
365
No of days
365
Inventory turnover
7.99
Inventory turnover
8.113
Days in inventory
45.68
Days in inventory
44.99
Analysis
The cost of sales of Walmart in the financial year 2015 was $365,086 million almost 5.8
times more of that of the Amazon in the fiscal years 2014 ($62,752 million). Walmart’s 2015
inventor...
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