B301 Sears vs Wal-Mart starting spreadsheet 1901

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Brigham Young University, Idaho *

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301

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Accounting

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Feb 20, 2024

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xlsx

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SEARS AND WALMART This exercise is about computing ratios and matching ratio values to a particular strategy of Sears and Wal-Ma STEP 1: Compute all the ratio values in the blue areas for both companies. STEP 2: Write in the green boxes in Column L, on the same row as each ratio, how the strategies of Sears and Exhibit 3 Sears, Roebuck and Co., 1997 Financial Statements FORECASTING RATIOS COGS, as a percent of sales 73.6% Selling, General Expense, as a percent of sales 20.2% Days of Inventory 68.8 Days of Receivables 178.3 Days of Payables (COGS Expense) 90.5 Percent Debt Financing 69.0% PERFORMANCE RATIOS Return on Equity 20.3% Return on Assets 3.1% Return on Sales 3.3% Statement of Income (millions, fiscal years ended December 31) 1997 Revenues Merchandise sales and services $ 36,371 Credit revenues $ 4,925 Total revenues $ 41,296 Costs and expenses Cost of sales, buying and occupancy $ 26,769 Selling and administrative $ 8,331 Provision for uncollectible accounts $ 1,532 Depreciation and amortization $ 786 Interest $ 1,409 Reaffirmation charge $ 475 Total costs and expenses $ 39,302

Operating income $ 1,994 Other income $ 106 Income before income taxes $ 2,100 Income taxes $ 912 Income from continuing operations $ 1,188 Discontinued operations $ - Net income $ 1,188 Balance Sheet (millions, fiscal year ended December 31) 1997 Assets Current assets Cash and cash equivalents $ 358 Retained interest in transferred credit card receivables $ 3,316 Credit card receivables $ 20,956 Less: Allowance for uncollectible accounts $ 1,113 $ 19,843 Other receivables $ 335 Merchandise inventories $ 5,044 Prepaid expenses and deferred charges $ 956 Deferred income taxes $ 830 Total current assets $ 30,682 Property and equipment Land $ 487 Buildings and improvements $ 5,420 Furniture, fixtures and equipment $ 4,919 Capitalized leases $ 498 $ 11,324 Less accumulated depreciation $ 4,910 Total property and equipment, net $ 6,414 Deferred income taxes $ 666 Other assets $ 938 Total assets $ 38,700 Liabilities Current liabilities Short-term borrowings $ 5,208 Current portion of LT debt and capitalized $ 2,561 Accounts payable and other liabilities $ 6,637 Unearned revenues $ 830

Other taxes $ 554 Total current liabilities $ 15,790 Long-term debt and capitalized lease obligations $ 13,071 Postretirement benefits $ 2,564 Minority interest and other liabilities $ 1,413 Total liabilities $ 32,838 Shareholders’ equity Common shares ($.75 par value, 1000 shares authorized 390.9 and 391.4 shares outstanding) $ 323 Capital in excess of par value $ 3,598 Retained income $ 4,158 Treasury stock-at cost $ (1,702) Minimum pension liability $ (217) Deferred ESOP expense $ (204) Cumulative translation adjustments $ (94) Total shareholders’ equity $ 5,862 Total liabilities and shareholders’ equity $ 38,700

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art, based on the Harvard article about those companies. d of Wal-Mart are reflected in the different ratio values. You may write short bullet point answers, and the Exhibit 9 Wal-Mart Stores, Inc., 1997 Financial Statements FORECASTING RATIOS COGS, as a percent of sales 79.2% Selling, General Expense, as a percent of sales 16.4% Days of Inventory 65.8 Days of Receivables 3.0 Days of Payables (COGS Expense) 35.6 Percent Debt Financing 28.1% PERFORMANCE RATIOS Return on Equity 19.1% Return on Assets 7.8% Return on Sales 3.0% Statement of Income (millions, fiscal years ended January 31) 1998 Revenues Net sales $ 117,958 Other income-net $ 1,341 $ 119,299 Costs and expenses Cost of sales $ 93,438 Operating, selling and general administrative $ 19,358 Interest costs Debt $ 555 Capital leases $ 229 $ 113,580 Income before incomes taxes, minority interest and equity in unconsolidated subsidiaries $ 5,719

Provision for income taxes Current $ 2,095 Deferred $ 20 $ 2,115 Income before minority interest and equity in unconsolidated subsidiaries $ 3,604 Minority interest and equity in unconsolidated subsidiaries $ (78) Net income $ 3,526 Balance Sheet (millions, fiscal year ended January 31) 1998 Assets Current assets Cash and cash equivalents $ 1,447 Receivables $ 976 Inventories At replacement cost $ 16,845 Less LIFO reserve $ 348 Inventories at LIFO cost $ 16,497 Prepaid expenses and other $ 432 Total current assets $ 19,352 Property, plant and equipment, at cost Land $ 4,691 Building and improvements $ 14,646 Fixtures and equipment $ 7,636 Transportation equipment $ 403 $ 27,376 Less accumulated depreciation $ 5,907 Net property, plant and equipment $ 21,469 Property under capital lease Property under capital lease $ 3,040 Less accumulated amortization $ 903 Net property under capital leases $ 2,137 Other assets and deferred charges $ 2,426 Total assets $ 45,384 Liabilities and shareholders’ equity

Current liabilities Accounts payable $ 9,126 Accrued liabilities $ 3,628 Accrued income taxes $ 565 Long-term debt due within one year $ 1,039 Obligations under capital leases due within one year $ 102 Total current liabilities $ 14,460 Long-term debt $ 7,191 Long-term obligations under capital leases $ 2,483 Deferred income taxes and other $ 809 Minority interest $ 1,938 Shareholders’ equity Preferred stock ($.10 par value; 100 shares authorized, none issued) Common stock ($.10 par value; 5,500 shares authorized, 2,241 and 2,285 issued and outstanding in 1998 and 1997, respectively) $ 224 Capital in excess of par value $ 585 Retained earnings $ 18,167 Foreign currency translation adjustment $ (473) Total shareholders’ equity $ 18,503 Total liabilities and shareholders’ equity $ 45,384

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e box will expand to hold however much your write. HOW DO THESE RATIO VALUES REFLECT THE DIFFERENT STRATEGIES OF EACH COMPANY? Walmart spends more money on COGS while Sears spends less. Making Sears more profitable in the eyes o Sears spends more money on selling and administrative expenses meaning that they are spending more o sales team and advertising Walmart's inventory sells faster than Sears. Walmart recieves their credit money faster than sears Walmart pays their money back faster than sears Sears is using more debt to finance their company than walmart Sears has a higher return on equity which means that they give more of their sales to equity/stockholders Walmart. Walmart uses their net income more in assets than sears Sears has a higher return on sales which means that they aren't spending as much on their expenses than Walmart