You have recently been appointed as an Adviser to Rukhsana Davison, Director of the OrganicToy Company. She is considering moving her business to online. Currently the businessoperates from a bedroom….
Making Business Decisions: Analyzing Wal-Mart’s Inventory Turnover Ratio You are considering an investment in the common stock of Wal-Mart.
Making Business Decisions: Analyzing Wal-Mart’s Inventory Turnover Ratio You are considering an investment in the common stock of Wal-Mart. The following information is from the financial statements of Wal-Mart Stores, Inc. and Subsidiaries included in Form 10-K for fiscal years 2016 and 2015 (in millions of dollars):
Part A. The Ratio Analysis Model An investor must assess how well a company is managing its inventory before buying its stock. The inventory turnover ratio tells us how many times in a year a company sells its inventory. Replicate the five steps in the Ratio Analysis Model on pages 238–239 to analyze the inventory turnover ratios for Wal-Mart and Target: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios
Part B. The Business Decision Model An investor must consider a variety of factors, including financial ratios, before buying stock. Replicate the five steps in the Business Decision Model on page 239 to decide whether to buy stock in Wal-Mart.
1. Formulate the Question
2. Gather Information from the Financial Statements and Other Sources
3. Analyze the Information Gathered 4. Make the Decision
5. Monitor Your Decision