Introduction
Based in Bentonville, the state of Arkansas in the United States of America, Walmart Inc. is one of the most expansive retailers in the world (Walmart, 2019). The constant growth of Walmart has enabled the company to enhance its stability in the retail market of the United States of America and the rest of the world. Walmart has been known to be the leading organization in various aspects such as having one of the largest employee bases across the globe (Walmart, 2019). The major competitors of Walmart within the United States of America are as follows. The first one is Amazon (Bhasin, 2018). Amazon is headquartered in Seattle in the state of Washington. The other competitor is eBay (Bhasin, 2018). eBay is based in San Jose, the state of California. The other competitor of Walmart within the country is Costco (Bhasin, 2018). Costco is based in Issaquah, the state of Washington. The paper focuses on the performance of Walmart against the industrial averages of the three competitors within the United States of America.
Profitability Ratios
Return on Assets (ROA)
The ROA of Walmart has reduced in the last three financial years as opposed to the industrial average which decreased from 2016 to 2017 and then exponentially increased in 2018 (Nasdaq, 2018). The reduction in the ROA of Walmart across the three fiscal years is an indicator of the decline in profitability of the organization. The ROA in 2016 for the retail Industry was slightly higher than that of Walmart (Nasdaq, 2018). Notably, the returns in the assets that were invested by Walmart's competitors on average were more than those Walmart realized. In 2017, the ROA of Walmart was higher than that of the competitors. That indicated that the company had higher returns per dollar of assets used in the investments.
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Liquidity Ratios
Current Ratio
The current ratio of Walmart recorded a continuous decrease in the three financial years. The decline in the current ratio is an indicator of the reduced liquidity of the company over the selected fiscal years (Nasdaq, 2018). That is to say that the ability of the company to make use of its liquid assets to take care of short-term financial obligations had reduced. Compared to the industrial averages, Walmart had a lower current ratio than the retail industry average in the three fiscal years (Nasdaq, 2018). That is to say that the other companies, who are competitors of Walmart in the retail industry of the United States of America, had higher liquidity than Walmart.
Solvency Ratios
Debt to Equity Ratio
The debt to equity ratio of Walmart has indicated a continual rise in the analysis made for the three financial years. The increase in the debt ratio places the company at risk of using up more debt to finance its operations rather than its equity (Nasdaq, 2018). The company's leverage may reduce with time. The debt to equity ratio of the retail industry averages rise in 2017 compared to 2016 and then slightly dropped in 2018 (Nasdaq, 2018). The industry averages were however higher than those of Walmart. Walmart uses fewer funds in the form of debt to finance its operations and investments more than the competitors do.
Conclusion
Comparatively, Walmart has a decline in its performance regarding liquidity and profitability. Besides, the solvency of Walmart is deteriorating with an increase in the debt to equity ratio, which may eventually reduce the net income of the company as more money gets used to pay debts acquired to finance its operations. On the other hand, the competitors of Walmart in the retail industry of the United States of America have been keen on performance with some of them being better than Walmart in terms of profitability and liquidity. Thus, Walmart needs to gear up to maintain its position in the United States of America's and the global retail market.
References
Bhasin, H. (2018, June 14). Top 19 Walmart Competitors - Competitor analysis of Walmart . Retrieved from https://www.marketing91.com/walmart-competitors/
Nasdaq. (2018). AMZN . Retrieved from https://www.nasdaq.com/symbol/amzn/financials?query=balance-sheet
Nasdaq. (2018). WMT. Retrieved from https://www.nasdaq.com/symbol/wmt/financials?query=balance-sheet
Walmart. (2019). Save Money. Live Better . Retrieved from https://www.walmart.com/
Appendices
| WALMART INC. | |||||||||
| profitability ratios | |||||||||
| return on assets | |||||||||
| ROA = Net income/average total assets×100 | |||||||||
| Walmart | |||||||||
|
2016 |
2017 |
2018 |
|||||||
| net income |
14694000000 |
13643000000 |
9862000000 |
||||||
| total assets |
1.99581E+11 |
1.98825E+11 |
2.04522E+11 |
||||||
| ROA |
0.073624243 |
0.068618132 |
0.048219751 |
||||||
|
7.36% |
6.86% |
4.82% |
|||||||
| industrial average | |||||||||
|
2016 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| net income |
2371000000 |
2350000000 |
7266000000 |
3995666667 |
|||||
| total assets |
83402000000 |
33163000000 |
23847000000 |
46804000000 |
|||||
| ROA |
0.028428575 |
0.070862105 |
0.304692414 |
0.085370196 |
|||||
|
2.84% |
7.09% |
30.47% |
8.54% |
||||||
|
2017 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| net income |
3033000000 |
2679000000 |
-1017000000 |
1565000000 |
|||||
| total assets |
1.3131E+11 |
36347000000 |
25986000000 |
64547666667 |
|||||
| ROA |
0.023098012 |
0.073706221 |
-0.03913646 |
0.024245648 |
|||||
|
2.31% |
7.37% |
-3.91% |
2.42% |
||||||
|
2018 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| net income |
10073000000 |
3134000000 |
2530000000 |
5245666667 |
|||||
| total assets |
1.62648E+11 |
40830000000 |
22819000000 |
75432333333 |
|||||
| ROA |
0.061931287 |
0.076757286 |
0.110872519 |
0.069541355 |
|||||
|
6.19% |
7.68% |
11.09% |
6.95% |
||||||
| Liquidity Ratio | |||||||||
| current ratio | |||||||||
| current ratio = current assets/current liabilities | |||||||||
| Walmart | |||||||||
|
2016 |
2017 |
2018 |
|||||||
| current assets |
60239000000 |
57689000000 |
59664000000 |
||||||
| current liabilities |
64619000000 |
66928000000 |
78521000000 |
||||||
| current ratio |
0.932218078 |
0.861956132 |
0.759847684 |
||||||
| industrial average | |||||||||
|
2016 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| current assets |
45781000000 |
15218000000 |
8875000000 |
23291333333 |
|||||
| current liabilities |
43816000000 |
15575000000 |
3847000000 |
21079333333 |
|||||
| current ratio |
1.044846631 |
0.977078652 |
2.306992462 |
1.104936905 |
|||||
|
2017 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| current assets |
60197000000 |
17317000000 |
7744000000 |
28419333333 |
|||||
| current liabilities |
57883000000 |
17495000000 |
3559000000 |
26312333333 |
|||||
| current ratio |
1.039977195 |
0.989825664 |
2.175892105 |
1.080076517 |
|||||
|
2018 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| current assets |
75101000000 |
20289000000 |
7126000000 |
34172000000 |
|||||
| current liabilities |
68391000000 |
19926000000 |
4454000000 |
30923666667 |
|||||
| current ratio |
1.098112325 |
1.018217404 |
1.599910193 |
1.105043602 |
|||||
| Solvency ratios | |||||||||
| debt to equity ratio | |||||||||
| debt to equity ratio = total liabilities/shareholders' equity | |||||||||
| Walmart | |||||||||
|
2016 |
2017 |
2018 |
|||||||
| total liabilities |
1.19035E+11 |
1.21027E+11 |
1.26653E+11 |
||||||
| shareholders' equity |
80546000000 |
77798000000 |
77869000000 |
||||||
| debt to equity ratio |
1.477851166 |
1.555656958 |
1.626488076 |
||||||
| industrial averages | |||||||||
|
2016 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| total liabilities |
64117000000 |
20831000000 |
13308000000 |
32752000000 |
|||||
| shareholders' equity |
19285000000 |
12079000000 |
10539000000 |
13967666667 |
|||||
| debt to equity ratio |
3.324708323 |
1.724563292 |
1.2627384 |
2.344844045 |
|||||
|
2017 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| total liabilities |
1.03601E+11 |
25268000000 |
17937000000 |
48935333333 |
|||||
| shareholders' equity |
27709000000 |
10778000000 |
8049000000 |
15512000000 |
|||||
| debt to equity ratio |
3.7388935 |
2.34440527 |
2.228475587 |
3.15467595 |
|||||
|
2018 |
|||||||||
| amazon | Costco | eBay | average | ||||||
| total liabilities |
1.19099E+11 |
27727000000 |
16538000000 |
54454666667 |
|||||
| shareholders' equity |
43549000000 |
12779000000 |
6281000000 |
20869666667 |
|||||
| debt to equity ratio |
2.734827436 |
2.169731591 |
2.63302022 |
2.609273427 |
|||||
