This would comprise a brief description of Walmart, the major US food chain conglomerate whose management accounting systems would be the main area of focus in this study.
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The Company whose management accounting information would be taken up for discussion is Wal-Mart. The reason for this is that this US Major is perhaps a strong contender for global brand leadership in fast-food chain outlets. “ Wal-Mart Stores, Inc., (NYSE: WMT) serves customers and members more than 200 million times per week at more than 8,400 retail units under 55 different banners in 15 countries. With the fiscal year 2010 sales of $405 billion, Walmart employs more than two million associates worldwide” (Walmart issues 2010 annual report to shareholders, 2010). Besides, it follows a fairly consistent, transparent, and simple management accounting system in its worldwide operations, and has honored local laws during its operations. As a matter of fact, it has tried to be a local-global food supermarket chain, in as much as its relation with customers, stakeholders and shareholders are concerned.
I need to assess the current budgeting process and procedures for Walmart with regard to the preparation of techniques uses for evaluation, differences between business units/divisions, etc. This was also with regard to how Walmart collects, stores, and prepares management accounting information, particularly the use of a costing and management accounting system (MAS) and how financial information is disseminated throughout Walmart’s organization. Often, in larger companies, “Product Cost Planning is used in an integrated system to value and move inventory at a common cost” (Cost planning: Process flow, 2007, p.7).
Next, it would be necessary to assess and evaluate the current costing processes and procedures followed by Walmart with regard to the costing processes and procedures this company follows. This was also to be in line with the description of Walmart’s present budgeting process and how it could be further improved upon.
Further, it is necessary to correctly assess the capital decision-making process within Walmart on what methods are utilized, how they are chosen, how the feasibility of marketing projects are identified, enforced, and monitored and what are the different measures being currently employed to evaluate Costing and management accounting performance on a global scale.
This would be in terms of make or buy, lease or own, use of discounted payback period, NPV, and Internal rate of return, among others, to assess the true work of investment projects. “Six key methods are used to rank projects and to decide whether or not they should be accepted for inclusion in the capital budget” (Brigham & Ehrhardt 2002, p.506).
Capital acquisition and structure
Finally, it is also necessary to assess the important determinants or criteria that are used for acquiring working capital and analyzing what the best and most optimum capital structure for a company of Walmart’s genre should be, given the market and non-market financial risks and challenges under which it presently operates in the global markets. Besides the competitive elements in the market, changing customer preferences and food tastes, governmental interferences, and the overall economic climate are also strong influencing factors in this business that cannot be ignored and which definitely affects capital structuring, use of debt capital, and the need to augment resources and profits through equitable means. However, given the kind of growth that Walmart has over the years of its useful life, it could easily “generate funds through its internal sources, viz. retained earnings or plowing back of profits, capitalization of profits and depreciation” (Guptha & Sharma 1991, p.15).
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This study is mainly focused on examining the current costing and management accounting system followed by the US food conglomerate food giant, Walmart. Perhaps one of the major reasons for their phenomenal success in the food sector has been their strong fiscal discipline along with sound and judicious investment decisions and above all, being positive-minded and progressive-minded in their approach to financial and cost management. The top management at Walmart believes in taking well-calculated and judged risks that not only consider the short or medium-term impacts but also its long-term impacts on its business interests in major destinations of the globe.
- Brigham, E. F. & Ehrhardt, M. C., 2002. Financial management theory and practice: Capital budgeting decision rules. 10th ed. Mike Roche: South Western, p.506.
- Cost planning: Process flow, 2007. [Online] SAP Best Practices, p.7.
- Guptha, S. K. & Sharma, R. K. 1991. Management accounting principles and practice: Sources of finance. Kalyani Publishers, p.15.
- Walmart issues 2010 annual report to shareholders, 2010. [Online] Trading Markets.com.