Balance Sheet Analysis

The discussion questions for Weeks 2 – 4 are designed to help teach you to derive meaning from financial statements. Each week you will select a line item and use Variance Trend Analysis to make some initial assessments about how the company is performing. Collectively, as a class, we will seek to find the “story behind the numbers.”

Let’s start applying what you have learned to a real-life Balance Sheet.

Locate and post a screenshot of a Balance Sheet from the investor relations section of the website from the latest fiscal year for one of the following companies:
FedEx
Pick a Balance Sheet line item from the following list:
Accounts Receivable
Inventory
Property, Plant, and Equipment (PP&E)
Accounts Payable
Long-Term Debt
Total Equity
Retained Earnings
What does this line item measure and why is it important item for Management to understand this number?
From the Balance Sheet, identify the Current Year and the Previous Year’s closing amounts for your line item. Share these with the class using a data table similar to the below:
Jack’s Toy Shop

(In thousands)

2018

2017

Inventory

$336.2

$304.5

Answer the following questions:
Has the amount for the line item increased or decreased, and by how much (dollar and/or percentage)?
Is this a “good” thing or a “bad” thing for this company?
What might this mean for the organization?
What might management do to improve this line item?
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.​

!st person to respond to

Hello Professor/Classmates,

Locate and post a screen shot of a Balance Sheet from the investor relations section of the website from the latest fiscal year for one of the following companies: Walmart

Pick a Balance Sheet line item from the following list:

As an investor, I found retained earnings an interesting line item on the Balance sheet.

What does this line-item measure and why is it important item for Management to understand this number?

Retained earnings measure all the company’s profits that have not been returned to the shareholders as dividends (Ittelson, 1). Fernando described it as “historical profits earned by a company, minus any dividends it paid in the past (2). Companies retain earnings; otherwise, their surplus is for various reasons, and management needs to understand this number as it relates to, for example, future investments, possible acquisition/mergers, shares buyback, paying back debt, and or other loans (2). The bottom line is to understand what is available and plan how to utilize the surplus efficiently.

From the Balance Sheet, identify the Current Year and the Previous Year closing amounts for your line item. Share these with the class using a data table similar to the below:

Company Walmart 20212020Retained Earnings $ 8,876,300.00 $ 8,394,300.00Note: Amts in Mil

Walmart’s retained earnings increase of $4,820,000 from $8,394,300 to 876,300.00 indicates the company’s increased profits from 2020 to 2021. A positive sign for the any investor/shareholder. Management can also look at whether they keep dividends percentage at the same level, or can they afford an increase, as I alluded to earlier look at making future investments, possible acquisitions/mergers, and paying down debt.

Based on five of historical data (Wallstreet Journal, 4), Walmart’s lowest retained earnings were captured in 2019 ($8,078,500) and highest in 2017 ($8, 935,400.) The 2021 data suggests a positive trend.

Phil

References

  1. Walmart Annual Report. 2021. Balance Sheet. Retrieved from: https://s2.q4cdn.com/056532643/files/doc_financials/2021/ar/WMT_2021_AnnualReport.pdf
  2. Thomas R. Ittelson. 2020. Financial Statements.
  3. Fernando, J. (2021). Retained Earnings. Investopedia. Retrieved from: https://www.investopedia.com/terms/r/retainedearnings.asp
  4. Walmart Inc. WSJ Markets. Retrieved from: https://www.wsj.com/market-data/quotes/WMT/financials/annual/balance-sheet

Reply Email Author

2nd person to respond to

Good Day Class and Prof Armstrong,

1.) I have selected Target’s balance sheet for this week’s discussion post. (1)

2.) The line item I will be examining is Inventory.

3.) Inventory measures finished products and materials to be made into products (2). Inventory is broken down into raw material inventory, work-in-progress inventory, and finished goods inventory. It is important for management to pay attention to this line item because they may need to increase it when they are forecasting increases in sales. If management fails to pay attention to inventory levels it could lead to a failure to satisfy customer demand (3). Management also needs to pay attention to inventory levels to ensure it doesn’t take on additional risk with having access inventory levels (3).

4.)

Target

(In Millions)

2020

2019

Inventory

$8,992

$9,497

5.) The inventory amount has decreased by $505M between 2019 and 2020. In order to determine risk with the inventory levels shown on the balance sheet you need to also look at a company’s annual report (3). The reason for this is because the balance sheet only states how much inventory value a business has. As stated in targets 2019 Annual Report, “We achieve effective inventory management by staying in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory levels for seasonal and apparel items to minimize markdowns.” (1). Also stated in the 2019 Annual report the reduction in inventory was “partially due to focused efforts to reduce inventory across multiple categories where we optimized on-hand quantities and assortment. Additionally, elevated inventory levels in the prior year reflected ntentional investments in toys merchandise.” (1). So in this case, the reduction in inventory levels was planned by management and I would say it is a good thing based on the financial results.

References:

Download the 2019 Target Annual Report | Target Corporate. (2020). Retrieved 15 July 2020, from https://corporate.target.com/_media/TargetCorp/annualreports/2019/pdfs/2019-Target-Annual-Report.pdf
Thomas R. Ittelson. 2020. Financial Statements, Third Edition.
Gene Siciliano. 2015. Finance for Nonfinancial Managers.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Benefits of our college essay writing service

  • 80+ disciplines

    Buy an essay in any subject you find difficult—we’ll have a specialist in it ready

  • 4-hour deadlines

    Ask for help with your most urgent short tasks—we can complete them in 4 hours!

  • Free revision

    Get your paper revised for free if it doesn’t meet your instructions.

  • 24/7 support

    Contact us anytime if you need help with your essay

  • Custom formatting

    APA, MLA, Chicago—we can use any formatting style you need.

  • Plagiarism check

    Get a paper that’s fully original and checked for plagiarism

What the numbers say?

  • 527
    writers active
  • 9.5 out of 10
    current average quality score
  • 98.40%
    of orders delivered on time
error: