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Introduction: What is Financial Statement Analysis?

Financial statement analysis is a process that examines past and current financial data for the

purpose of evaluating performance and estimating future risk and potentials. Financial

statement analysis is used by investors, creditor, security analysts, bank lending officers,

managers, governmental agencies, suppliers, and many other parties who rely on financial

data for making economic decisions about a company.

Analysis of financial statements focuses primarily on data provided in external reports plus

supplementary information provided by management. The analysis should identify major

changes or turning points in trends, amounts, and relationships financial statements are

merely summaries of detailed financial information. Many different groups are interested in

getting inside financial statements, especially investors and creditors. Their objectives are

sometimes different but often related. However, the basic tools and techniques of financial

statement analysis can be applied effectively by all of the interested groups. Financial

statement analysis can assist investors in finding the type of information they require for

making decisions to their interests in a particular company.

Financial statement analysis is an evaluative method of determining the past, current and

projected performance of a company. Several techniques are commonly used as part of

financial statement analysis including horizontal analysis, which compares two or more years

of financial data in both dollar and percentage form; vertical analysis, where each category of

accounts on the balance sheet is shown as a percentage of the total account; and ratio

analysis, which calculates statistical relationships between data.

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Financial reports are the primary means by which managers communicate company results to

investors, creditors and analysts. These parties use the reports to judge company

performance, to assess creditworthiness, to predict future financial performance, and to

analyze possible acquisitions and take-over. Users of financial statements must be able to

meaningfully interpret financial reports, construct measures of financial performance and

analyze the reporting choices made by companies. Also, since company managers choose

accounting techniques when making their reports, users must learn to undo the effects of

these accounting choices.

It is the process of identifying financial strengths and weaknesses of the firm by properly

establishing relationship between the items of the balance sheet and the profit and loss

account.

Financial statement analysis is a study ofaccounting ratios between various items in

financial statements. Ratios are classified as profitability ratios, liquidity ratios, asset

utilization ratios, leverage ratios and valuation ratios based on the indications they provide.

Balance sheet,Income Statementand Cash Flow Statements are the most important financial

statements and if properly analyzed and interpreted can provide valuable insights into a

companys business.

Income Statement a financial statement that shows the revenues, expenses and net

income of a firm over a period of time

Balance Sheet a financial statement that shows the value of the firms assets and

liabilities at a particular time

Statement of Cash Flows a financial statement that tracks cash coming into and

flowing out of a firm over a period of time



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A comprehensive financial statement analysis can highlight some of the more important

issues and questions a savvy investor will usually ask such as-

Does the company have enough liquidity to overcome any short-term market

fluctuations?

How was the performance relative to the industry it belongs to?

How risky is it to invest in this company?

How does the company handle its working capital?

How did the company perform over the last couple of years and what were the returns

it generated for the previous stakeholders?



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Objective of Financial Statement Analysis:

All financial statements are essentially historically historical documents. They tell what has

happened during a particular period of time. However most users of financial statements are

concerned about what will happen in the future. Stockholders are concerned with future

earnings and dividends. Creditors are concerned with the company's future ability to repay its

debts. Managers are concerned with the company's ability to finance future expansion.

Despite the fact that financial statements are historical documents, they can still provide

valuable information bearing on all of these concerns.

Financial statement analysis involves careful selection of data from financial statements for

the primary purpose of forecasting the financial health of the company. This is accomplished

by examining trends in key financial data, comparing financial data across companies, and

analyzing key financial ratios.

Managers are also widely concerned with the financial ratios. First the ratios provide

indicators of how well the company and its business units are performing. Some of these

ratios would ordinarily be used in a balanced scorecard approach. The specific ratios selected

depend on the company's strategy. For example a company that wants to emphasize

responsiveness to customers may closely monitor the inventory turnover ratio. Since

managers must report to shareholders and may wish to raise funds from external sources,

managers must pay attention to the financial ratios used by external inventories to evaluate

the company's investment potential and creditworthiness.

Although financial statement analysis is a highly useful tool, it has two limitations. These two

limitations involve the comparability of financial data between companies and the need to

look beyond ratios. Comparison of one company with another can provide valuable clues

about the financial health of an organization. Unfortunately, differences in accounting

methods between companies sometime make it difficult to compare the companies' financial



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Overview of the Company:

Wal-Mart Stores, Inc. (Wal-Mart, the Company, they or it) operates retail stores in

various formats around the world and is committed to saving people money so they can live

better. It earns the trust of customers every day by providing a broad assortment of quality

merchandise and services at everyday low prices (EDLP), while fostering a culture that

rewards and embraces mutual respect, integrity and diversity. EDLP is Companys pricing

philosophy under which they price items at a low price every day so the customers trust that

their prices will not change under frequent promotional activity. Our focus for Sams Club is

to provide exceptional value on brand name and private label merchandise at members only

prices for both business and personal use. Internationally, they operate with similar

philosophies. Their fiscal year ends on January 31 for U.S. and Canada operations and on

December 31 for all other operations. They discuss how the results of their various operations

are consolidated for financial reporting purposes in Note 1 in the Notes to Consolidated

Financial Statements. They intend for this discussion to provide the reader with information

that will assist in understanding the financial statements, the changes in certain key items in

those financial statements from year to year, and the primary factors that accounted for those

changes, as well as how certain accounting principles affect their financial statements. They

also discuss certain performance metrics that management uses to assess their performance.

The discussion also provides information about the financial results of the various segments

of their business to provide a better understanding of how those segments and their results

affect the financial condition and results of operations of the Company as a whole. This

discussion should be read in conjunction with our Consolidated Financial Statements as of

January 31, 2011, and the fiscal year then ended and accompanying notes. Currently, our

operations consist of three reportable business segments: (1) the Wal-Mart U.S. segment; (2)

the Wal-Mart International segment; and (3) the Sams Club segment. The Wal-Mart U.S.



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segment includes the Companys mass merchant concept in the United States and Puerto

Rico, operating under the Wal-Mart or Wal-Mart brand, as well as walmart.com. The

Wal-Mart International segment consists of the Companys operations outside of the United

States and Puerto Rico. The Sams Club segment includes the warehouse membership clubs

in the United States and Puerto Rico, as well as samsclub.com. Throughout this

Managements Discussion and Analysis of Financial Condition and Results of Operations, we

discuss segment operating income and comparable store and club sales. The Company

measures the results of its segments using, among other measures, each segments operating

income, including certain corporate overhead allocations. From time to time, we revise the

measurement of each segments operating income, including any corporate overhead

allocations, as dictated by the information regularly reviewed by our chief operating decision

maker. When we do so, the prior period amounts for segment operating income are

reclassified to conform to the current periods presentation.



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The significant Recent Events:

1. Wal-Mart Closes Investment in 51% Stake in MassmartCompany looks forward to lowering prices, creating jobs and working with stakeholders

BENTONVILLE, Ark., June 20, 2011 /PRNewswire via COMTEX/ -- Wal-Mart Stores, Inc.

(NYSE:WMT) announced today that the company has completed its investment for a 51%

stake in South African-based Massmart Holdings Limited (JSE:MSM) for ZAR148.00 per

Massmart ordinary share.

2. Wal-Mart Board Approves New $15 Billion Share Repurchase Program

BENTONVILLE, Ark.--(BUSINESS WIRE)-- Wal-Mart Stores, Inc. (NYSE:WMT - News)

announced at its 41st Annual Meeting of Shareholders today that its Board of Directors approved

a new program authorizing the company to repurchase $15 billion of its shares. This program

replaces the previous $15 billion program, announced on June 4, 2010, that had approximately

$2 billion of remaining authorization. Under the program, repurchased shares are constructively

retired and returned to unissued status.

3. The South African Competition Tribunal approves merger and accepts conditionsproposed by Wal-Mart and Massmart

The Competition Tribunal today announced that the Wal-Mart and Massmart merger can proceed

to finality and has accepted the conditions proposed by Wal-Mart and Massmart, which include

the set-up of a R100 million supplier development fund, no merger-related retrenchments for a

period of two years as well as continued recognition of SACCAWU for three years post the

merger. The Competition Tribunal further acknowledged the undertaking made by the merging

parties that preference would be given to re-employing the 503 workers that were retrenched in

2010 prior to the proposed merger being announced.



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Auditors Report:

[Wal-Mart have retained Ernst & Young LLP, an independent registered public accounting

firm, to audit their Consolidated Financial Statements found in this Annual Report to the

Shareholders. The Auditors Report is mentioned below:]

We have audited the accompanying consolidated balance sheets of Wal-Mart Stores, Inc. as

of January 31, 2011 and 2010, and the related consolidated statements of income,

shareholders equity, and cash flows for each of the three years in the period ended January

31, 2011. These financial statements are the responsibility of the Companys management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company

Accounting Oversight Board (United States). Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are

free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting

principles used and significant

Estimates made by management, as well as evaluating the overall financial statement

presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material

respects, the consolidated financial position of Wal-Mart Stores, Inc. at January 31, 2011 and

2010, and the consolidated results of its operations and its cash flows for each of the three



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years in the period ended January 31, 2011, in conformity with U.S. generally accepted

accounting principles.

As discussed in Note 2 to the consolidated financial statements, effective May 1, 2010, the

Company has elected to change its method of accounting for inventory under the retail

inventory method.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States), Wal-Mart Stores, Inc.s internal control over financial

reporting as of January 31, 2011, based on criteria established in Internal Control

Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread

way Commission and our report dated March 30, 2011 expressed an unqualified opinion

thereon.



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References:

1. http://www.financialstatementanalysis.org2. http://EzineArticles.com/18934553.

http://investors.walmartstores.com4. Wal-Mart 2011 Annual Report.
http://www.financialstatementanalysis.org/http://ezinearticles.com/1893455http://ezinearticles.com/1893455http://investors.walmartstores.com/http://investors.walmartstores.com/http://investors.walmartstores.com/http://ezinearticles.com/1893455http://www.financialstatementanalysis.org/

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