walmart sears case

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Case Questions: Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc. Answers must be posted to Compass. You may work in groups of no more than four people. Be sure to remember to submit ALL names and UINs on the assignment. 1. How do the retailing strategies of Sears and Wal-Mart differ? How does each firm operate their business/attempt to create value? The major difference in these two companies’ retailing strategies, according to their filings in 2014, lies in the ways they expand their sales. Wal-Mart realizes its sales by opening new retail units both in the U.S. and abroad, broadening the scope of merchandise offered for sale, and committing to price leadership. According to its annual report, it prices items at a low price…show more content…
This requires a larger storage of inventory than grocery and entertainment goods, which Wal-Mart sells mostly. Besides, in preparation for the fourth quarter holiday season, Sears significantly increases its merchandise inventory levels, which may have some effect on its reported inventory levels. Apparently Wal-Mart is executing better because its cash conversion cycle is far smaller than Sears. 4. How useful are financial ratios in evaluating the current performance of each of the two companies? Are there any distortions in the comparisons? Most financial ratios are useful in evaluating their performance, including days inventory outstanding and days payable outstanding. However, since these two companies basically receive cash upon transaction, their days sales outstanding are significantly low compared to companies in other industries. Thus their receivable turnover ratios are less useful than other turnover ratios. Besides, because their accounts receivable levels are low, some of their liquidity ratios are low. Wal-Mart’s and Sears’ current ratios are 0.88 and 1.09. It appears that both companies have trouble satisfying short-term obligations, which is not the case. Similarly, working capital creates distortions in the evaluation of their performance as well. 5. How useful are financial ratios in comparing the relative performance of these two companies? Are there any distortions in the comparisons?
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