EXECUTIVE SUMMARY

Every report has its own theme. The essence of this report is to know the financial condition of
WALMART. This report helps to know about what WALMART is all about and how the
company is performing in financial terms. To measure the financial performance of the company,
ratio analysis is conducted. For this analysis to be conducted, data is needed. Balance sheet and
profit and loss account of the company are used which is purely an secondary data ( given in
appendixes) to make such analysis. The time period taken for conducting this analysis is from
2009 to 2013 i.e. five years. The conclusion made from this analysis is that WALMART has been
growing strongly and is performing well in every financial aspect.

Page 1
 CHAPTER 1 RESEARCH METHODOLODY

Research design:-

A research design is the way or the methods or the procedure followed to conduct an scientific
research. Some of the types of research design are exploratory research design, descriptive
research design and causal research design. Each has its own meaning. Causal research design
helps us to know a cause and effect relation between two variables, whereas exploratory research
design is used to find new ideas and insight. Descriptive research design is a type of research
method that is used when one wants to get information on the current status of a person or an
object. in this study there only one company and no new ideas are to be found. The major focus
would be on to know current financial position of WALMART. For this a descriptive type of
research design is used.

Time period:-

Data from 2008 to 2012 are collected to analyse the performance of the WALMART.

Objective of the study:-

Objective means the main purpose of the report i.e. stating why this report is prepared and what
it wants to say. The only objective of this study is to WALMARTS current financial position
with the use of various financial ratios.

Data collection method: -

There are two ways one can collect data i.e. through primary source (which means generating
ones own information by surveys or interviews etc.) or through secondary source (which are
readily available like information in newspaper, magazines, websites etc.). For this report only
secondary data are used as the basic objective is to study WALMARTS financial position, there
is no need to conduct a survey or interviews, which are sources of primary data.

Type of data:-

Data included in the balance sheet, profit and loss account and cash flow statement of the
company are used.

Method of analysis:-

Various financial ratios are used to evaluate the corporate financial positions along with various
graphs and charts.

Page 2
Limitations of the study:-

1) Secondary data is never cent percent correct. So if the data used in the report for
evaluation are incorrect or incomplete the results would be misleading.
2) Alteration of data at source of origin can alter the results.
3) Time constraints.

Page 3
CHAPTER-1 - INTRODUCTION

Back ground of the study

Wal-Mart is the largest retail store in the United States, and is larger than any other retail chain in
the world. Currently Wal-Mart operates over 4,150 retail facilities globally. Also, the company
is the dominant retail store in Canada, Mexico, and the United Kingdom. According to the
Fortune 500 index of the wealthiest and most powerful corporations in the world, Wal-Mart
holds the number one spot, ranked by its total sales. The company is ranked as the second most
admired company in the world by Fortune.
Wal-Mart provides general merchandise: family apparel, health & beauty aids, household needs,
electronics, toys, fabrics, crafts, lawn & garden, jewelry and shoes. Also, the company runs a
pharmacy department, Tire & Lube Express, and Photo processing center as well. When Sam
Walton created Wal-Mart in 1962, he declared that three policy goals would define his business:
respect for the individual, service to customers, and striving for excellence.
Wal-Mart's corporate management strategy involves selling high quality and brand name
products at the lowest price (Vance, 119). In order to keep low prices, the company reduces
costs by the use of advanced electronic technology and warehousing. It also negotiates deals for
merchandise directly from manufacturers, eliminating the middleman.
Wal-Mart's community outreach focuses on the goals of providing customer satisfaction,
involving itself with local community services, and providing scholarships. Its emphasis is on
children and environmental issues.

During the 1970s, the retail industry became highly competitive, but, at the same time the
economy became weak due to inflation. Sears was the leading retailer in the nation, during the
1970s, however, the recession of 1974-1975 and inflation affected Sears adversely. Sears
targeted middle class families and expanded its overhead. Wal-Mart's strategy was to compete
with its rivals and lower overhead expenses. Compared with Sears, who consisted of more than
6,000 distribution centers, Wal-Mart had only 2,500 comparable units.

Today, Wal-Mart has 1,636 retail stores. There are 1,093 Wal-Mart Super centers, 502 Sam's
Clubs, 31 Wal-Mart Neighborhood stores and 1,183 international stores. Its core retail business
can be divided into four retail divisions: Wal-Mart stores, super centers, Sam's Club warehouses
and neighborhood markets. Wal-Mart stores and Super centers provide "one-stop family
shopping"; combining groceries and general merchandise departments.

Page 4
History of the company:

1962 :Wal-Mart opened the first store In Rogers, Ark.

1970 :Wal-Mart opens first distribution center and home office in Bentonville, Ark.
1970 :Wal-Mart traded stocks as a publicly held company
1971 :Wal-Mart in five states: Arkansas, Kansas, Louisiana, Missouri and Oklahoma.
1972 : Wal-Mart approved and listed on the New York Stock Exchange.
1973 :Wal-Mart in Tennessee.
th
1974 :Wal-Mart stores now in Kentucky and Mississippi, Texas becomes 9 .
1977 :Wal-Mart entered Illinois. 11th state: Alabama.
1981 :Wal-Mart opened at Georgia and South Carolina
1982 :Wal-Mart opened at Florida and Nebraska.
1983 :First SAM'S CLUB opened in Midwest City, OK People Greeter implemented at all store.
Wal-Mart enters Indiana, Iowa, New Mexico and North Carolina.
1984:David Glass named company president. Wal-Mart enters Virginia
1985 :Wal-Mart has 882 stores with sales of $8.4 billion and 104,000 Associates. Company adds
stores in Wisconsin and Colorado.
1986 : Wal-Mart enters Minnesota.
1989 :Wal-Mart is now in 26 states with the addition of Michigan, West Virginia and Wyoming.
1990 : Wal-Mart becomes nation's No. 1 retailer. McLane Company of Temple, Texas acquired
Wal-Mart enters California, Nevada, North Dakota, Pennsylvania, South Dakota and Utah.
1991 : Wal-Mart enters Connecticut, Delaware, Maine, Maryland, Massachusetts, New
Hampshire, New Jersey and New York. "Sam's American Choice" brand products introduced.
International market entered for first time with the opening of a unit Mexico City.
1992 : Sam Walton passes away April 5. S. Robson Walton named chairman of the board April 7.
Wal-Mart has entered 45 states with the addition of Idaho, Montana and Oregon. Wal-Mart enters
Puerto Rico.
1993 : Wal-Mart enters Alaska, Hawaii, Rhode Island and Washington.
1994 : Wal-Mart enters Canada by the acquisition of Woolco, and takes over 123 former Woolco
stores across Canada. It opens 96 stores in Mexico. Three value clubs open in Hong Kong.
1995 : Wal-Mart enters its 50th state - Vermont - and builds three units in Argentina and five in
Brazil.
1996 : Wal-Mart enters China
1997 :Wal-Mart replaces Woolworth on the Dow Jones Industrial Average
th
2000 :Wal-Mart ranked 5 by FORTUNE magazine in its Global Most Admired All-Stars list. H.
Lee Scott named president and CEO of Wal-Mart Stores, Inc. Wal-Mart ranked #1 Corporate Citizen

Page 5
in America in the 2000 Cone/Roper Report, an annual national survey on philanthropy and corporate
citizenship.
2001 :Wal-Mart has the biggest single day sales in history: $1.25 billion on the day after
Thanksgiving. (www.walmartstore.com. About Wal-Mart)
2007 :Walmart.com launched Site to Store service, enabling customers to make a purchase
online and pick up merchandise in stores.

2010 :Bharti Walmart, a joint venture, opened its first store in India.

Page 6
OBJECTIVE OF THE COMPANY:

As a major international public company, Walmart has lots of objectives. Here are some of them
taken directly from Walmarts 2011 Annual Report

Expand multi-channel initiatives

Strategies:
Develop and execute a global eCommerce strategy
Accelerate global online channel growth
Have accessible stores available for all of the customers needs

Tactics:
Conduct research on customers
Use new formats, such as Walmart Express, in urban and rural markets.
Open Walmarts first convenience format stores, Walmart Express, in the second quarter.
Investing in global eCommerce (online commerce)
Create technology platforms and applications for every Walmart market
Deepening their understanding of consumer trends and creating new analytical tools.
Leveraging multi-channel innovations like Site-to-Store, Pick Up TodaySM and Fed-
Ex Site to Store

Grow in the United States

Strategies:
Keep improving Sams Club
Maintain excellent customer service Give the customers what they want: quality
products at affordable prices
Implement a four-point plan to improve comparable store sales (Investopedia says: This
statistic [comparable store sales] allows investors to determine what portion of new sales has
come from sales growth and what portion from the opening of new stores.)
Implement productivity initiatives

Tactics:
Page 7
 Open more supercenters
Attract more customers and Sams Club members
Use new formats, such as Walmart Express, in urban and rural markets.
Open Walmarts first convenience format stores, Walmart Express, in the second quarter.
Expanding their assortment, reallocating selling space and enhancing productivity
initiatives to reduce costs.
Adding services to their pharmacies, such as free monthly health screenings and hearing
centers.
Continue to add exciting brands in key categories, including apparel, jewelry, technology
and entertainment.
Conduct research on customers
Deepening their understanding of consumer trends and creating new analytical tools.

Improve returns

Strategies:
Balance their commitment to aggressive growth with their long-term plan
Achieve positive comparable store sales [through four-point plan]
Enhance shareholder value

Tactics:
Opening supercenters in new regions of Canada and changing the competitive
environment in Brazil with a shift to EDLP [every day low prices].
Leveraging multi-channel innovations like Site-to-Store, Pick Up TodaySM and Fed-
Ex Site to Store
Expanding their assortment, reallocating selling space and enhancing productivity
initiatives to reduce costs.
Adding services to their pharmacies, such as free monthly health screenings and hearing
centers.
Continue to add exciting brands in key categories, including apparel, jewelry, technology
and entertainment.
Deepening their understanding of consumer trends and creating new analytical tools.
Attract more customers and Sams Club members
Use new formats, such as Walmart Express, in urban and rural markets.
Open Walmarts first convenience format stores, Walmart Express, in the second quarter.

Mission slogan:
Page 8
"Save money. Live better."
Saving people money so they can live better was a goal Sam Walton envisioned when he opened
the first Wal-Mart store more than 40 years ago. Today, with thousands of stores in a number of
formats around the globe, this mission is embedded in our business; it lives in our culture; and it
impacts every part of our Company from our customers and our shareholders, to our
associates and our communities.

SWOT ANALYSIS:

Page 9
Strengths

1 Scale of operations. Walmart is the largest retailer in the world with more than $400 billion
in revenue and 10,130 stores. It makes Walmart the giant that no other retailer can match.
Due to such large scale of operations, the corporate can exercise strong buyer power on
suppliers to reduce the prices. It can also achieve higher economies of scale than competitors
because of its size. Higher economies of scale results in lower prices that are passed to
consumers.

2 Competence in information systems. The corporate achieves significant cost savings

because of its extensive information systems that tracks orders, inventory levels, sales and
other related information in real time. All this information can be instantly accessed,
analyzed and decisions made at each store. Effective management of supply chain and
logistics is one of the most important factors for Walmart success.

3 Wide range of products. Walmart can offer wider range of products than any other retailer.
It sells grocery, entertainment, health and wellness, apparel and home related products among
many other categories and offers both branded and own label goods. Wide range of products
attracts more customers to Walmart stores.

4 Cost leadership strategy. This strategy has helped Walmart to become the low cost leader in
the retail market. This strategy requires selling products ant the lowest price possible and
providing a no frill services to achieve higher economies of scale and attract masses of
consumers and that is exactly what the company is doing. It sells products at much lower
prices than competitors do, builds warehouse style superstores that contain extensive range of
products but doesnt offer much additional benefits or services. All of this result in cost
reductions and lower prices for consumers.

Weaknesses

1. Labor related lawsuits. Walmart faces labor related lawsuits every year, which costs
millions of dollars for the company. It is criticized for poor work conditions, low wages,
unpaid overtime work and female discrimination. In addition to litigation costs, corporates
reputation has been damaged and fewer skilled workers are willing to work for it.

2. High employee turnover. The business suffers from high employee turnover that
increases firms costs, as it has to train new employees more often. The main reason for high
employee turnover is low skilled, poorly paid jobs.

3. Little differentiation. Walmart has no differentiation compared to its competitors, which

might hurt the company in the future if commodity prices or average consumer income would
Page 10
 increase. In this case, low cost leadership strategy wouldnt be as effective as it currently is
and Walmarts main competitive advantage would erode.

4. Negative publicity. The company is often criticized for its questionable practices such as
bribery of authorities or poor work conditions. Negative publicity damages corporates
reputation.

Opportunities

1. Retail market growth in emerging markets. Retail markets grew by at least 5% on

average in emerging markets in the last year, opening huge opportunities for Walmarts
revenue growth. The business currently operates in Brazil, Mexico, China and India markets.
Walmart should increase its presence in these markets to sustain future growth.

2. Rising acceptance of own label products. The sales of private label products have
increased by more than 40% over the last 10 years. This reveals increasing consumer
acceptance of supermarket chain products compared to national brand products. Walmart has
an opportunity to increase the number of private label products sold at its stores and earn
higher profit margins.

3. Trend toward healthy eating. The current trend of eating healthier food has resulted in
higher demand for grocery products. Walmart has an opportunity to expand its grocery stores
to earn more income from this trend.

4. Online shopping growth. Online retail sector grew by 4.7% in the US in 2011, reaching
$197 billion. Walmart being the biggest offline retailer has huge opportunities to expand its
presence in online retail market. The company can offer convenience to pick up the goods
ordered online in its more than 10,000 stores and can offer even lower prices online than at
the store. As a result, Walmart can reach more customers and increase its revenue.

Threats

1. Increasing competition from brick and mortar and online competitors. Competitors
like Target, Costco, Amazon and Tesco (in UK) are putting huge efforts to eliminate price
differences that Walmart enjoys. Except the lower prices, Walmart doesnt differ from other
low cost retailers and will experience increased competition from them in the future.

2. Increasing resistance from local communities. Walmart superstores have a negative

impact on local retailers and communities. Some of the local retailers are usually forced to
close off when Walmart superstore opens in the area. This affects not only the retailers but
their families and the community as a whole.

Page 11
3. Rising commodity product prices. Rising commodity prices squeeze Walmarts profit
margins and erode its competitive advantage. As prices go up, the cost difference between the
retailers decreases and competition shifts from price to product and service differentiation.

CHAPTER 2 - LITERATURE REVIEW:-

There are a number of studies that address claims about Wal-Marts impacts on local labor
markets, emphasizing the retail sector. However, we regard much of this literature as
uninformative about the causal impact of Wal-Mart on retail employment and earnings. First,
some of the existing work is by advocates for one side or the other in local political disputes
regarding Wal-Marts entry into a particular market. These studies are often hastily prepared,
plagued by flawed methods and arbitrary assumptions, and sponsored by interested parties such
as Wal-Mart itself, its competitors, or union groups(e.g., Bianchi and Swinney, 2004; Freeman,
2004; and Rodino Associates, 2003), and can hardly be expected to provide impartial evidence
on Wal-Marts effects. Hence, they are not summarized here. There is also an academic literature
on the impact of Wal-Mart stores, focusing on the effects of Wal-Mart openings on local
employment, retail prices and sales, poverty rates, and the concentration of the retailing industry,
as well as the impact on existing businesses. This research is limited by three main factors: the
restriction of much of it to small regions (often a single small state); its lack of focus on
employment and earnings effects; and its failure to account for the endogeneity of Wal-Mart
locations, either at all or (in our view) adequately. Many of these studies, especially the early
ones, focus on the effects of Wal-Mart at the regional level, spurred by the expansion of Wal-
Mart into a particular region. The largest number of studies focus on the effects of Wal-Mart on
retail busin/esses and sales, rather than on employment and earnings. The earliest study, which is
typical of much of the research that has followed, is by Stone (1988). He defines the pull factor
for a specific merchandise category as the ratio of per capita sales in a town to the per capita
sales at the state level, and examines the changes in the pull factor for different merchandise
categories in host and surrounding towns in Iowa after the opening of Wal-Mart stores. Stone
finds that in host towns, pull factors for total sales and general merchandise (to which all Wal-
Mart sales belong) rise after the arrival of Wal-Mart. Pull factors for eating and drinking and

Page 12
home furnishing also go up because Wal-Mart brings in more customers. However, pull factors
for grocery, building materials, apparel, and specialty stores decline, presumably due to direct
competition from Wal-Mart. He also finds that small towns surrounding Wal-Mart towns suffer a
larger loss in total sales compared to towns that are further away.7 Related results for other
regionswhich generally, although not always, point to similar conclusionsare reported in
Keon, et al. (1989), Barnes, et al. (1996), Davidson and Rummel (2000).

CHAPTER 4

THEORETICAL FRAME WORK OF RATIOS

Ratio Analysis is the calculation and comparison of main indicators - ratios which are derived from the
information given in a company's financial statements (which must be from similar points in time and
preferably audited financial statements and developed in the same manner). It involves methods of
calculating and interpreting financial ratios in order to assess a firm's performance and status. This
Analysis is primarily designed to meet informational needs of investors, creditors and management. The
objective of ratio analysis is the comparative measurement of financial data to facilitate wise investment,
credit and managerial decisions.

Importance and Advantages of Ratio Analysis

Ratio analysis is an important tool for analyzing the company's financial performance. The
following are the important advantages of the accounting ratios.

1. Analyzing Financial Statements

Ratio analysis is an important technique of financial statement analysis. Accounting ratios are
useful for understanding the financial position of the company. Different users such as investors,
management. bankers and creditors use the ratio to analyze the financial situation of the
company for their decision making purpose.

2. Judging Efficiency

Accounting ratios are important for judging the company's efficiency in terms of its operations
and management. They help judge how well the company has been able to utilize its assets and
earn profits.

3. Locating Weakness

Page 13
Accounting ratios can also be used in locating weakness of the company's operations even
though its overall performance may be quite good. Management can then pay attention to the
weakness and take remedial measures to overcome them.

4. Formulating Plans

Although accounting ratios are used to analyze the company's past financial performance, they
can also be used to establish future trends of its financial performance. As a result, they help
formulate the company's future plans.

5. Comparing Performance

It is essential for a company to know how well it is performing over the years and as compared
to the other firms of the similar nature. Besides, it is also important to know how well its
different divisions are performing among themselves in different years. Ratio analysis facilitates
such comparison.

LIMITATIONS OF RATIO ANALYSIS

1. Comparison not possible if different firms adopt different accounting

policies.

2. Ratio analysis becomes less effective due to price level changes.

3. Ratio may be misleading in the absence of absolute data.

4. Limited use of a single data.

5. Lack of proper standards.

6. False accounting data gives false ratio.

7. Ratios alone are not adequate for proper conclusions.

8. Effect of personal ability and bias of the analyst.

9. Differences in definitions

Page 14
10. Limitations of accounting records

11. Lack of proper standards

12. No allowances for price level changes

13. Changes in accounting procedures

14. Quantitative factors are ignored

15. Limited use of single ratio

CHAPTER 5 - RATIO ANALYSIS

1) Profitability ratio:-
The name says it all. It shows the profitability of the firm.

Every corporate house or firm needs to earn profit not only to survive but also to expand or
diversify. Not only this, profit needs to be earned to give returns to investors, payment to
creditors, salaries and wages to the employees, and the list goes on.

These classes of ratio are used to evaluate the companys ability to generate excess revenue over
expenses

A) Gross profit ratio:-

GP ratio is a ratio which shows relationship between sales and gross profit. It is a very effective
tool for finding the operational performance of the company.

This can be found out by dividing gross profit by net sales.

GPR = GROSS PROFIT /NET SALES *100

(IN $ BILLION)
2009 2010 2011 2012 2013

Page 15
 NET SALES 401.09 408.21 421.85 446.95 496.16
GROSS 97.03 103.56 106.56 111.82 116.67
PROFIT
GP RATIO 24.19% 25.37% 25.26% 25.02% 23.51%

GP RATIO
26.00%

25.50% 25.37%
25.26%
25.02%
25.00%

24.50% GP RATIO
24.19%
24.00%
23.51%
23.50%

23.00%

22.50%
2009 2010 2011 2012 2013

Analysis:-
By viewing this we see that the gross profit ratio increases from year 2009 to 2010 but then this
ratio decreases inspite of increase in gross profit.This means that gross profit increases although
ratio decreases.

B) Net Profit Ratio:-

NP ratio is an another tool to measure the profitability of the firm. It is an indicator about how
efficient is the firm is and well it is able to control its costs. Its an indicator about how much
revenues are converted into actual profits by the company.

This can be calculated by dividing profit after tax by net sales.

Page 16
 NPR = NPAT / NET SALES *100

(IN $ BILLION)
2009 2010 2011 2012 2013
PAT 13.25 14.41 15.36 15.77 17
NET SALES 401.09 408.21 421.85 446.95 469.16
NP RATIO 3.30% 3.53% 3.64% 3.53% 3.62%

NP Ratio
3.70%
3.64%
3.62%
3.60%
3.53% 3.53%
3.50%
NP Ratio
3.40%
3.30%
3.30%

3.20%

3.10%
2009 2010 2011 2012 2013

Analysis: -
By analyzing this graph we see that profit margin increase year by year except year 2012 that
mean company achieve good profit from business and company tries to maintain this by
increasing net sales .

2) Liquidity ratio:-
Lteiquidity ratios are those ratios which show the companys ability to meet the companys short
term obligations. These ratios help to measure the ability of the firm to pay back their obligations
when they become due.

Page 17
A) Current ratio:-
This is a balance sheet financial performance ratio which shows whether the company has the
ability or assets to repay their current liabilities over the next one year.if the ratio is more than1:1
that means company has those assets to repay their current liabilities, if less opposite would be
the situation.

It could be found out by dividing current assets by current liabilities.

CURRENT RATIO = CURRENT ASSET / CURRENT LIABLITIES

(IN $ BILLION)
2009 2010 2011 2012 2013
CURRENT 48.95 48.33 51.89 54.98 59.94
ASSET
CURRENT 55.39 55.56 58.48 62.30 71.82
LIABLITIE
S
CURRENT 0.88 0.87 0.89 0.88 0.83
RATIO

Current ratio
0.89
0.89 0.88
0.88 0.88
0.87
0.87
0.86
0.85
Current ratio
0.84
0.83
0.83
0.82
0.81
0.8
2009
2010
2011
2012
2013

Page 18
Analysis:-
We say that current ratio is high till year 2012 but in year 2013 its become too much low mainly
due to its current liability increase and also its asset increase with that. So company believes in
tries to maintains that ratio.

B) Acid test ratio:-

Another type of liquidity ratio, which measures short term liquidity position of the company is
acid test ratio also known as quick ratio.

This ratio suggest whether the firm has enough short term assets to cover its short term liabilities
without selling its inventory. This means the company having enough backing to pay current
assets almost immediately.

For this liquid assets are divided by liquid liabilities, where liquid assets includes all current
assets except for inventory and prepaid expenses, because they cannot be converted into cash
immediately for payments, while liquid liabilities include all current liabilities except for bank
overdraft and cash credit because they are not to be paid immediately.

QUICK OR ACID TEST RATIO = LIQUID ASSET / LIQUID LIABILITIES

(IN $ BILLION)
2009 2010 2011 2012 2013
LIQUID 14.44 15.18 15.57 14.27 16.14
ASSET
LIQUID 55.39 55.56 58.48 62.30 71.82
LIABILITIE
S
QUICK OR 0.26 0.27 0.27 0.23 0.22
ACID TEST
RATIO

Page 19
 Acid test ratio
0.3 0.27 0.27
0.26
0.25 0.23 0.22
0.2
Acid test ratio
0.15

0.1

0.05

0
2009 2010 2011 2012 2013

Analysis: -
Quick ratio is increasing till the year 2010, then it has shown a declining trend. It means that
quick assets is not increasing by the same percentage as the current liabilities.

3) Turn over ratios:-

Accounting ratios that measure a firm's ability to convert different accounts within their balance
sheets into cash or sales. Companies would like to convert those accounts into cash as fast as
possible. This type of turnover ratios shows if they are able to do so or not.

A) Inventory turnover ratio:-

In accounting, the Inventory turnover is a measure of the number of times inventory is sold or
used in a time period such as a year. The equation for inventory turnover equals the Cost of
goods sold divided by the average inventory. Inventory turnover is also known as inventory
turns, stock turn, stock turns, turns, and stock turnover.

INVENTORY TURNOVER RATIO = COGS/AVGRAGE STOCK

(IN $ BILLION)
Page 20
 2009 2010 2011 2012 2013
COGS 297.32 297.5 307.65 327 343.99
AVERAGE
STOCK 34.84 33.84 34.74 38.52 42.26
INVENTORY
TURNOVER
RATIO 8.53 8.79 8.86 8.49 8.14

Inventory turnover ratio

9
8.86
8.8 8.79

8.6
8.53 8.49
8.4 Inventory turnover ratio

8.2
8.14
8

7.8

7.6
2009 2010 2011 2012 2013

Analysis:-
The inventory turnover ratio is not consistent from the year 2009 to the year 2013. From the
year 2009 to the year 2011, it has shown an increasing trend, indicating that number of times the
inventory is sold or used has increased. But it has declined in 2012 and 2013 showing that
number of times the inventory sold or used has decreased.

B) Fixed asset turnover ratio:-

Fixed asset turnover is the ratio of sales to value of fixed assets, indicating that how well the
company uses its fixed assets to generate sales.

Higher the ratio, the better it is because it would mean that the company has less amount of
money tied up in fixed assets for each unit of sales revenue.

Page 21
A declining ratio indicates that the company has overinvested in plant, machinery, or other fixed
assets.

FIXED ASSETS TURNOVER RATIO = NET SALES / FIXED ASSETS

(IN $ BILLION)
2009 2010 2011 2012 2013
NET SALES 401.09 408.21 421.85 446.95 496.16
FIXED 284.96 340.11 357.49 371.63 390.56
ASSETS
FIXED 1.41 1.20 1.18 1.20 1.27
ASSETS
TURNOVE
R RATIO

Fixed assets ratio

2013 1.27

2012 1.2

Fixed assets ratio

2011 1.18

2010 1.2

2009 1.41

1.05 1.1 1.15 1.2 1.25 1.3 1.35 1.4 1.45

Page 22
Analysis:-
This ratio has declined all these years except 2013 where it has shown a bit of improvement. This
ratio shows that how much of sales is generated by using fixed assets.

C) Current assets turnover ratio:-

It indicates the companies capability of generating sales by effectively using its current assets.

Higher current ratio is good for the company as it indicates that the company is able to generate
maximum amount of sales revenue with minimum amount of capital. Vice versa would be the
case if the ratio is low.

CURRENT ASSET TURNOVER RATIO = NET SALES / CURRENT ASSET

(IN $ BILLION)
2009 2010 2011 2012 2013
NET SALES 401.09 408.21 421.85 446.95 496.16
CURRENT
48.95 48.33 51.89 54.98 59.94
ASSET
CURRENT 8.19 8.45 8.13 8.13 8.28
ASSET
TURNOVE
R RATIO

Page 23
 Current assets ratio
8.45
8.45
8.4
8.35
8.28
8.3
8.25 8.19 Current assets ratio
8.2
8.13 8.13
8.15
8.1
8.05
8
7.95
2009 2010 2011 2012 2013

Analysis: -
Current Assets Turnover Ratio is increasing in one year and decreasing in another year and so
forth. This means that the amount of sales generated by current assets is increasing in one year
and then decreasing in another and so forth.

D) Assets turnover ratio.

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.

ASSET TURNOVER RATIO = NET SALES / AVGRAGE ASSET

(IN $ BILLION)
2009 2010 2011 2012 2013
SALES 401.09 408.21 421.85 446.95 496.16
AVGRAGE
ASSETS 163.49 196.42 180.36 189.36 198.26
ASSET
TURNOVE
R RATIO 2.45 2.08 2.34 2.36 2.50

Page 24
 Assets turnover ratio
3
2.45 2.36
2.5 2.34 2.5

2
2.08 Assets turnover ratio
1.5

0.5

0
2009 2010 2011 2012 2013

Analysis: -
The company is able to increase its assets turnover ratio over the years. This increasing trend in
ratio shows increase in sales generated by increase in overall assets of the company.

E) Working capital turnover ratio:

Working capital means current assets minus current liabilities. The working capital turnover ratio
is used to analyze the relationship between the money used to fund operations and the sales
generated from these operations. The higher the working capital turnover, the better because it
means that the company is generating a lot of sales compared to the money it uses to fund the
sales.

WORKING CAPITAL TURNOVER RATIO = NET SALES / WORKING CAPITAL

(IN $ BILLION)
2009 2010 2011 2012 2013
NET SALES 401.09 408.21 421.85 446.95 496.16
WORKING 22.89 27.84 23.53 23.79 21.9

Page 25
 CAPITAL
WORKING 17.52 14.66 17.93 18.79 22.66
CAPITAL
TURNOVE
R RATIO

Working capital
20
18
16
14
12 Working capital
10 18.79
17.52 17.83
8
14.66
6
4
2
0
2009 2010 2011 2012 2013

Analysis
Working capital turnover ratio has increased since the year 2010. It indicates that lot of sales is
generated as compared to the money used in funding the sales.

4) Solvency ratio:-
Solvency ratios measures company ability to meet its long term obligations. It provides an
assessment of the likelihood of a company to continue congregating its debt obligations.

A) Debt equity ratio =

It is a long term solvency ratio which indicates how much part of the capital is provided by
shareholders and how much part by creditors.

Page 26
Also termed as external internal ratio, a 1:1 ratio indicates creditors and shareholders have equal
contribution in total capital.

A ratio higher than 1:1 means the portion of assets contributed by shareholders is more, which
creditors like because it gives more creditability of their money to them.

A ratio lower than 1:1 meansthe contribution of assets by creditors is more, which shareholders
like to get money from creditors.

DEBT EQUITY RATIO = DEBT / SHAREHOLDERS FUND

(IN $ BILLION)
2009 2010 2011 2012 2013
DEBT 40.56 46.62 55.17 64.94 49.03
SHAREHOLDER 67.48 73.24 71.66 76.17 82.26
S FUND
DEBT EQUITY 0.60 0.64 0.77 0.85 0.60
RATIO

Debt equity
0.9
0.8
0.7
0.6
0.5 Debt equity

0.4 0.85
0.77
0.3 0.6 0.64 0.6
0.2
0.1
0
2009 2010 2011 2012 2013

Analysis:-
Page 27
Debt equity ratio has increased from the year 2009 to the year 2012 indicating that outside
creditors for the company has increased over the years. But in the year 2013, this ratio has
declined showing decrease in outside creditors.

Proprietary ratio:-
The proprietary ratio shows that how sound is the capital structure of the company. This means
what is the contribution of shareholders in the total capital structure of the company.

An higher proprietary ratio indicates the contribution of the shareholders is more in the capital
structure and thus giving greater security to the creditors.

A lower ratio indicates the company is very heavily dependent on debt foe its operations, thus
reducing the interest of creditors in the company, increase in interest expenses and also increase
in risk of bankruptcy.

PROPRIETARY RATIO = TOTAL ASSETS / PROPRIETORS FUND

(IN $ BILLION)
2009 2010 2011 2012 2013
PROPRIETORS
65.29 70.75 68.54 71.32 76.34
FUND
TOTAL 333.91 388.44 409.38 426.61 450.5
ASSETS
PROPRIETARY 0.196 0.182 0.167 0.167 0.169
RATIO

Page 28
 Proprietary ratio

2013 0.17

2012 0.17
Proprietary ratio
2011 0.17

2010 0.18

2009 0.2

0.15 0.16 0.17 0.18 0.19 0.2

Analysis: -
This ratio has declined from the year 2009 to the year 2013. It indicates that the capital structure
of the company has more of debts as compared to proprietors fund.

B) Return on asset ratio:-

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings.

It indicates number of dollar earned on each dollar of asset.

Higher ratio means the company is earning more dollars per dollar of asset.

RETURN ON ASSET RATIO = NET PROFIT AFTER TAX / NET ASSETS

(IN $ BILLION)
2009 2010 2011 2012 2013
NET PROFIT 13.25 14.41 15.36 15.77 17
AFTER TAX

Page 29
 NET ASSETS 163.49 196.42 180.36 189.36 198.26
ROA RATIO 8.10% 7.34% 8.52% 8.33% 8.57%

ROA ratio
9.00%

8.50%

8.00% ROA ratio

7.50% 8.52% 8.57%

8.33%
8.10%
7.00% 7.34%
6.50%
2009 2010 2011 2012 2013

Analysis:
Except the year 2010, it has shown an increasing trend. It shows that earning of company is more
as compare to each unit of asset.

C) Return on Equity (ROE)

Return on equity (ROE) measures the rate of return on the ownership interest (shareholders'
equity) of the common stock owners. It measures a firm's efficiency at generating profits from
every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE
shows how well a company uses investment funds to generate earnings growth. ROEs between
15% and 20% are generally considered good.

RETURN ON EQUITY= PAT/AVG. SHAREHOLDER EQUITY

(IN $ BILLION)
2009 2010 2011 2012 2013

Page 30
 NET PROFIT
AFTER TAX 13.25 14.41 15.36 15.77 17.00
AVG.
SHAREHOLDE
R EQUITY 66.54 70.36 72.45 73.96 79.26
ROE RATIO
19.91% 20.48% 21.20% 21.32% 21.45%

ROE ratio
21.50%

21.00%

20.50% ROE ratio

21.32% 21.45%
21.20%
20.00%
20.48%

19.50% 19.91%

19.00%
2009 2010 2011 2012 2013

Analysis:
It has shown an increasing trend from the year 2009 till the year 2013. It indicates that
companys efficiency in generating profit from shareholders equity has increased all these years.

Page 31
 CHAPTER 6 CONCLUSION
Ratio analysis has a major significance in analyzing the financial performance of a company
over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency
have an impact on the profit margin or turnover ratios of a company.
Financial ratios are essentially concerned with the identification of significant accounting
data relationships, which give the decision-maker insights into the financial performance of a
company.
The analysis of financial statements is a process of evaluating the relationship between
component parts of financial statements to obtain a better understanding of the firms
position and performance.
The first task of financial analyst is to select the information relevant to the decision under
consideration from the total information contained in the financial statements. The second
step is to arrange the information in a way to highlight significant relationships. The final
step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is
the process of selection, relation and evaluation.
Ratio analysis in view of its several limitations should be considered only as a tool for
analysis rather than as an end in itself. The reliability and significance attached to ratios will
largely hinge upon the quality of data on which they are based. They are as good or as bad as
the data itself. Nevertheless, they are an important tool of financial analysis.
Ratios make the related information comparable. A single figure by itself has no meaning, but
when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are
relative figures reflecting the relationship between related variables. Their use as tools of
financial analysis involves their comparison, as single ratios, like absolute figures, are not of
much use.

Page 32
 REFERENCES

www.moneycontrol.com
www.wikipedia.com

Page 33
 ANNEXURE

BALANCE SHEET
Assets 2009 2010 2011 2012 2013
Cash & Short Term
7.28B 7.91B 7.4B 6.55B 7.78B
Investments
Cash Only - 3.07B 1.7B 1.75B 7.78B
Short-Term Investments - 4.84B 5.69B 4.8B 0
Total Accounts
3.91B 4.14B 5.09B 5.94B
Receivable
Accounts Receivables,
3.91B 4.14B 5.09B 5.94B 6.77B
Net
Accounts Receivables,
3.91B 4.14B 5.09B 5.94B 6.88B
Gross
Bad Debt/Doubtful
- - - - (115M)
Accounts
Other Receivables 0 0 0 0 0
Inventories 34.51B 33.16B 36.32B 40.71B 43.8B
Finished Goods 34.51B 33.16B 36.32B 40.71B 43.8B
Work in Progress 0 0 0 0 0
Raw Materials 0 0 0 0 0
Progress Payments &
0 - - 0 0
Other
Other Current Assets 3.26B 3.12B 59.94B 1.77B 1.59B
Miscellaneous Current
3.26B 3.12B 3.09B 1.77B 1.59B
Assets
Total Current Assets 48.95B 48.33B 51.89B 54.98B 59.94B
Net Property, Plant &
95.65B 102.31B 107.88B 112.32B 116.68B
Equipment
Property, Plant &
131.16B 143.52B 154.49B 160.94B 171.72B
Equipment - Gross
Buildings 73.81B 77.45B 79.05B 84.28B 90.69B
Land & Improvements 19.85B 22.59B 24.39B 23.5B 25.61B
Computer Software and
- - - - -
Equipment
Page 34
Other Property, Plant &
- 35.45B 38.29B 39.23B 40.9B
Equipment
Accumulated Depreciation 35.51B 41.21B 46.61B 48.61B 55.04B
Total Investments and
0 0 0 0 0
Advances
Other Long-Term
0 0 0 0 0
Investments
Long-Term Note
0 0 0 0 0
Receivable
Intangible Assets 15.26B 16.13B 16.76B 20.65B 20.5B
Net Goodwill 15.26B 16.13B 16.76B 20.65B 20.5B
Net Other Intangibles 0 0 0 0 0
Other Assets 3.37B 3.94B 4.13B 4.72B 5.23B
Tangible Other Assets 0 3.94B 4.13B 4.72B 5.23B
Total Assets 163.43B 175.41B 185.3B 193.41B 203.11B
Liabilities 2009 2010 2011 2012 2013
ST Debt & Current
7.67B 4.92B 6.02B 6.35B 12.72B
Portion LT Debt
Short Term Debt 1.51B 523M 1.03B 4.05B 6.81B
Current Portion of Long
6.16B 4.4B 4.99B 2.3B 5.91B
Term Debt
Accounts Payable 28.85B 30.45B 33.56B 36.61B 38.08B
Income Tax Payable 701M 1.37B 157M 1.21B 2.33B
Other Current Liabilities 18.17B 18.83B 18.75B 18.14B 18.69B
Dividends Payable - - - - -
Accrued Payroll 5.58B 5.99B 5.9B 5.09B 5.06B
Miscellaneous Current
12.59B 12.84B 12.85B 13.05B 13.63B
Liabilities
Total Current Liabilities 55.39B 55.56B 58.48B 62.3B 71.82B
Long-Term Debt 34.55B 36.4B 43.84B 47.08B 41.42B
Long-Term Debt excl.
31.35B 33.23B 40.69B 44.07B 38.39B
Capitalized Leases
Non-Convertible Debt 31.35B 33.23B 40.69B 44.07B 38.39B
Convertible Debt 0 0 0 0 0
Capitalized Lease
3.2B 3.17B 3.15B 3.01B 3.02B
Obligations
Provision for Risks &
0 0 0 0 684M
Charges
Deferred Taxes 2.87B 1.04B 1.7B 3.88B 3.62B
Deferred Taxes - Credit 3.08B 5.74B 6.34B 4.62B 4.37B
Deferred Taxes - Debit 202M 4.71B 4.64B 738M 757M
Other Liabilities 2.94B 4.47B 4.99B 3.25B 2.56B
Other Liabilities (excl. 2.94B 4.47B 4.99B 3.25B 2.56B

Page 35
Deferred Income)
Deferred Income - - - - -
Total Liabilities 95.95B 102.18B 113.65B 117.24B 120.85B
Non-Equity Reserves 0 0 0 0 0
Preferred Stock (Carrying
0 0 0 0 0
Value)
Redeemable Preferred
0 0 0 0 0
Stock
Non-Redeemable
0 0 0 0 0
Preferred Stock
Common Equity (Total) 65.29B 70.75B 68.54B 71.32B 76.34B
Common Stock Par/Carry
393M 378M 352M 342M 332M
Value
Retained Earnings 63.66B 66.64B 63.97B 68.69B 72.98B
ESOP Debt Guarantee 0 0 0 0 0
Cumulative Translation
Adjustment/Unrealized (2.41B) - 1.29B (813M) 176M
For. Exch. Gain
Unrealized Gain/Loss
0 0 0 0 0
Marketable Securities
Revaluation Reserves 0 0 0 0 0
Treasury Stock 0 0 0 0 0
Total Shareholders'
65.29B 70.75B 68.54B 71.32B 76.34B
Equity
Accumulated Minority
2.19B 2.49B 3.11B 4.85B 5.91B
Interest
Total Equity 67.48B 73.24B 71.66B 76.17B 82.26B
Liabilities &
163.43B 175.41B 185.3B 193.41B 203.11B
Shareholders' Equity

Page 36
 PROFIT AND LOSS ACCOUNT

Patricular 2009 2010 2011 2012 2013

Sales/Revenue 401.09B 408.21B 421.85B 446.95B 469.16B
Cost of Goods Sold
304.06B 304.66B 315.29B 335.13B 352.49B
(COGS) incl. D&A
COGS excluding D&A 297.32B 297.5B 307.65B 327B 343.99B
Depreciation &
6.74B 7.16B 7.64B 8.13B 8.5B
Amortization Expense
Depreciation - 7.16B 7.64B 8.13B 8.4B
Amortization of
- 0 0 0 101M
Intangibles
Gross Income 97.03B 103.56B 106.56B 111.82B 116.67B
SG&A Expense 77.52B 78.92B 81.02B 85.27B 88.87B
Research &
0 0 0 0 0
Development
Other SG&A 77.52B 78.92B 81.02B 85.27B 88.87B
Other Operating
0 0 0 0 0
Expense
Unusual Expense 0 689M - 0 0
EBIT after Unusual
0 (689M) - 0 0
Expense
Non Operating
3.29B 0 0 0 0
Income/Expense
Non-Operating Interest
284M 181M 201M 162M 187M
Income
Equity in Affiliates
- - - - -
(Pretax)
Interest Expense 2.18B 2.07B 2.21B 2.32B 2.25B
Gross Interest Expense 2.27B 2.15B 2.27B 2.38B 2.33B
Interest Capitalized 88M 85M 63M 60M 74M
Pretax Income 20.9B 22.07B 23.54B 24.4B 25.74B
Income Tax 7.15B 7.14B 7.58B 7.94B 7.98B
Income Tax - Current
5.34B 6.4B 5.24B 5.34B 6.23B
Domestic
Income Tax - Current
1.23B 1.25B 1.47B 1.4B 1.77B
Foreign
Income Tax - Deferred
655M (371M) 857M 1.5B 30M
Domestic
Income Tax - Deferred (74M) (133M) 19M (299M) (48M)
Page 37
Foreign
Income Tax Credits 0 0 0 0 0
Equity in Affiliates 0 0 0 0 0
Other After Tax Income
0 0 0 0 0
(Expense)
Consolidated Net
13.75B 14.93B 15.96B 16.45B 17.76B
Income
Minority Interest
499M 513M 604M 688M 757M
Expense
Net Income 13.25B 14.41B 15.36B 15.77B 17B
Extraordinaries &
146M (79M) 1.03B (67M) 0
Discontinued Operations
Extra Items & Gain/Loss
0 0 0 0 0
Sale Of Assets
Cumulative Effect -
0 0 0 0 0
Accounting Chg
Discontinued Operations 146M (79M) 1.03B (67M) 0
Net Income After
13.4B 14.34B 16.39B 15.7B 17B
Extraordinaries
Preferred Dividends 0 0 0 0 0
Net Income Available to
13.25B 14.41B 15.36B 15.77B 17B
Common
EPS (Basic) 3.40 3.71 4.48 4.54 5.04
Basic Shares
3.94B 3.87B 3.66B 3.46B 3.37B
Outstanding
EPS (Diluted) 3.39 3.70 4.47 4.52 5.02
Diluted Shares
3.95B 3.88B 3.67B 3.47B 3.39B
Outstanding
EBITDA 26.25B 31.8B 33.18B 34.69B 36.3B

Page 38