Week 3 Project FIN4060 Instructions
Examine the statement of cash flows for the companies you selected in Week 1 for the most recent ye
Week 3 Project FIN4060 Instructions
Examine the statement of cash flows for the companies you selected in Week 1 for the most recent year.
Summarize your course project to this point. What have you learned about your companies?
What are the two largest investing activities and financing activities for each firm?
Compare and contrast the investing and financing activities of the two companies.
Evaluate the investing and financing strategies of the two firms? Provide a rationale for your opinion as to the effectiveness of each of the strategies.
Submit a 2-3 page Microsoft Word document, using APA style. Course Project
Financial statement analysis
Alibaba and Walmart are well-established e-commerce retail companies that operate globally. Alibaba is well known for the high consistency and value of its products while Walmart for high sales. These two companies have stable financial status because of their high global reputation. The paper analyzes the income and balance sheet statements of Walmart and Alibaba.
Income Statement items
One important income statement item for investors is the sales or revenue. This represents the income generated from an organization’s operations before deducting the expenses. Revenue would be important for an investor as it helps assess the growth of a company. (Hasanaj & Kuqi, 2019). Walmart has high revenue and reports increasing and stable revenue. In FY 2021, it reported revenue of $559,551M a 6.72% increase from 2020 ($523,964M). Alibaba reported sales of $109, 480M in FY 2021, a 52.09% rise from 2020 ($71.985B). Both Walmart and Alibaba have been reporting increasing revenue; however, Alibaba has high revenue increase than Walmart. Besides, Walmart reports high revenue compared to Alibaba.
The second important item is the net income. It indicates the amount of profit a company made after paying off all its expenses. It is the amount available to pay dividends, reinvest and repurchase shares. Walmart reported a net income of $13.51B in FY 2020, a 9.21% decrease from 2020 ($14.881B). Alibaba reported Net Income of $22.941B, an 8.83% increase from 2020 ($21.08B). Alibaba reports a high net income compared to Walmart. Besides, Alibaba has stable and increasing Net income, unlike Walmart.
The third item is operating income which would be important for investors as it is an indirect measure of efficiency (Hasanaj & Kuqi, 2019). Walmart reported an operating income of $22.548B, a rise of 9.63% from $20.568B (2020). Alibaba, on the other hand, reported a 13.688B, an increase of 5.35% from $12.993B. Walmart reports high operating income than Alibaba. Besides, Walmart’s operating income is more stable and predictable compared to Alibaba.
Balance Sheet items
The first balance sheet item is current assets. They are important because they help finance the operational expenses of a company, therefore, an indicator of liquidity (Dauderies & Annand, 2019). Walmart reported a CA of $90,067M in FY 2021, an increase from $61,806M. Alibaba, on the other hand, reported $ 98,196M, an increase from $65,377M. Alibaba has high and increasing current assets than Walmart to finance short-term obligations.
The second item is current liabilities which is important as they provide useful information about the financial state of the company to an investor. Walmart reported current liabilities of $ 92,645M in 2021, an increase from $77,790M. Alibaba had current liabilities of $57,596M in FY 2021, an increase from $35,916M. Although both companies have increasing current liabilities, Walmart reports high current liabilities than Alibaba.
The third item is cash and cash equivalent. They are important because they help the company finance working capital needs (Dauderies & Annand, 2019). Walmart reported a value of $17,741M in FY 2021, an increase from $9,465M. Alibaba, on the other hand, had $73,788M in FY 2021, an increase from $55,437M. Both companies have increasing cash and cash equivalents; however, Alibaba reports a high value compared to Walmart.
Analysis based on the income statement and balance sheet
Based on the income statement, Walmart has high revenue and operating income compared to Alibaba, while Alibaba has high Net income than Walmart. Generally, the nature of the income statement of the two companies is good; however, Walmart can be considered much better than Alibaba. According to the balance sheet, Alibaba reports high cash and cash equivalents, high current assets, and low current liabilities than Walmart. The financial state of Alibaba based on a balance sheet is better than Walmart.
In conclusion, both Alibaba and Walmart have good financial positions. However, the nature of Alibaba’s balance sheet is better than Walmart while the nature of Walmart’s income statement is better than Alibaba’s.
Alibaba Group., 2021. 2021 Annual Report. https://www.businesswire.com/news/home/20210513005533/en/Alibaba-Group-Announces-March-Quarter-and-Full-Fiscal-Year-2021-Results.
Dauderies, H., & Annand, D. (2019). Introduction to financial accounting. Lyryx.
Hasanaj, P., & Kuqi, B. (2019). Analysis of financial statements. Humanities and Social Science Research, 2(2), p17-p17. https://doi.org/10.30560/hssr.v2n2p17.
Walmart., 2021. 2021 Annual Report. https://s2.q4cdn.com/056532643/files/doc_financials/2021/ar/WMT_2021_AnnualReport.pdf.