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Walmart Company’s Financial Performance

Walmart Company

Walmart is “the world’s largest retail chain,” which has around “11,700 stores in 28 countries” (Marr, 2017). The strategy of the company’s network includes “the maximum range and minimum prices, which tend to be wholesale” (Marr, 2017). Walmart International is a wholesale and retail trade outside the United States.

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However, there are potential risks for the company that may affect Walmart’s business in different directions. These are various factors that can affect the financial or any other component of the business. It is impossible to predict all the risks that Walmart may face, and other difficulties may arise, depending on the circumstances.

Business Risks for Walmart

Different economic conditions and factors may affect Walmart’s financial performance. “Higher interest rates, lower or higher prices of petroleum products, higher costs for electricity and other energy” (Marr, 2017) affect the company’s operations and may lead to the “impairment charges to intangible assets, goodwill or other long-lived assets” (Marr, 2017).

Natural disasters, natural hazards or frequent weather changes, global epidemics or pandemics, man-made disasters, and any other large-scale obstacles or events could affect Walmart’s operations and financial performance.

Political and economic instability, other impactful events and circumstances in the countries in which Walmart’s suppliers are located, instability of suppliers and any other problems connected to suppliers, problems with products, unexpected and sharp price increases, inconsistencies between the product and the required quality, delays, problems with transport and delivery, errors in the name of goods, any errors related to mixed orders that cannot be predicted or prevented due to the human factor, incorrect calculations can affect the performance of Walmart’s own duties.

New laws in emerging countries (where its factories are located) requiring large wage increases that it can raise prices elsewhere could diminish its margins and healthcare costs, killing its SG&A. Due to the laws, the company may be unable to contract suppliers who are willing to produce bulk products at reduced margins, exchange rates, and high costs related to building new technologies, among others.

A business is a complex system with many components that are interconnected. For example, without marketing, there will be no sales; without staff, there is no one to develop the product. Business relationships can be difficult to track and evaluate. However, all of them are reflected in the finances — the blood of the business, which helps to move it forward.

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Compliance Issues

It is important for every business to comply with the Generally Accepted Accounting Principles (GAAP):

  1. The principle of regularity; means that the company should follow the rules.
  2. The principle of consistency implies that the necessary rules are followed when making transactions. The principle of sincerity means that business owners should be impartial and should not work according to their preferences.
  3. The principle of permanence of methods.

It implies that before making a financial report, the company should follow all the procedures needed. The principle of non-compensation means that all the procedures are conducted without permission to have debts. The principle of prudence means that if there is any speculation in the company, the managers still are to make financial reports. Then, there is the principle of continuity, which implies that assets are necessary for the company’s operations to continue. The principle of periodicity means that financial reports are produced during certain periods of time. The principle of materiality considers the fact that financial reporting is crucial to control the company’s budget. Finally, there is the principle of utmost good faith, which states that all partners should act honestly.

Balance Sheet and Income Statement

To make management decisions, Walmart company needs information. It is useful to see the whole business to evaluate and understand all the details. This is what the Balance Sheet is designed for. The balance sheet summarizes all the assets of the company — what it owns; and liabilities — the funds on which it lives. On the one hand, the balance sheet of the company would include equipment, raw materials, and goods in stock. It may also include loans and borrowings, investments in authorized capital, and retained earnings (Larkin & DiTommaso, 2018). The asset and the liability of the balance sheet are always equal to each other — in the world, nothing arises from emptiness. The equipment is difficult to sell, and the money in the account is easy to put into circulation. The easier it is to release investments, the higher the liquidity of the asset. On the other hand, each liability has its own degree of urgency — something needs to be returned quickly, and something can be with the company all the time. The balance sheet enables the company to see the current state of money and correlate liquidity and urgency.

The income statement would display the financial result of activities for a certain period and decode the components of income and expenses. The income statement enables the company to see the financial result and its components, calculate important financial ratios, such as marginality and profitability, and calculate the break-even point. Walmart’s income statement totally complies with all the GAAP principles.

Cash Flow Statement

The cash flow statement enables the company to see and understand how much they can spend and whether there are enough funds to purchase equipment or hire new employees. In addition, the company can keep all the accounts in the report at once (Larkin & DiTommaso, 2018). It is important to track the cash flow, but this is not a panacea. The cash flow statement will not replace other management reports: it does not take into account the company’s liabilities, and it is difficult to correlate accrual methods and the profitability of work.

Audit Universe

According to the potential risks for the company, the following audit sampling program is appropriate. First, the objectives of the audit and sampling are to find out and define the company’s losses and incomes in goods and maintain the plan for future procedures. To do this, the convenience sampling method will be applied. In convenience sampling, all the members are selected due to their preferences and willingness to participate (Munteanu, 2018). However, the people who are willing to take part may not be the ones who are necessary for the audit. The sample population should include such characteristics as sex and gender (Munteanu, 2018). The evaluation would be conducted in terms of the financial condition of the company and would include losses and incomes.

The preferable testing procedure would be the computer-assisted audit technique (CAAT). The method is utilized in considering great amounts of data and information (Jaber & Wadi, 2018). The testing would also include the use of software and databases. The company would analyze its every transaction using the CAAT technique.

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Jaber, R., & Wadi, R. (2018). Auditors’ usage of computer-assisted audit techniques (caats): Challenges and opportunities. In Conference on e-Business, e-Services and e-Society (pp.365-375). Springer, Cham.

Larkin, R., & DiTommaso, M. (2018). Wiley not-for-profit GAAP 2018: Interpretation and application of generally accepted accounting principles. John Wiley & Sons.

Marr, B. (2017). Really big data at Walmart: Real-time insights from their 40+ petabyte data cloud. Forbes. com, 23.

Munteanu, V. (2018). Application of the sampling selection technique in approaching financial audit. Web.

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