Liquidity Ratios the Current Ratio Research Proposal

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This also justifies the large value of inventory previously pointed out when the current ratio was calculated.

The debt to assets ratio will show the leverage of the company and evaluate the financial risk at Wal-Mart. In 2007, the debt to assets ratio at Wal-Mart was 0.216. The financial leverage used by the company is quite small, but the explanation for this resides not necessarily in the small value of debt (as we have seen previously, the company does use this as an important method of financing its activities), but in the very high value of the assets, part of these being financed by shareholders' equity. Things like markets and buildings are worth the largest part of the total assets (property is listed at $109,798 million in 2007).

The times interest earned ratio shows the company's ability to meet all its assumed debt obligations. In our case, in 2007 Wal-Mart's times interest ratio was 13.198. This shows a solid approach to financial issues, the company being able to cover its interest obligations from its current earnings over 13 times over.

Activity ratios

The days of inventory at Wal-Mart were 46.54 in 2007, compared to 49 days to sell the inventory in 2006.

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The slight decrease is caused by the increase of inventory value at a faster pace than the net cost of sales. The inventory turnover was 9.94 in 2007, compared to 9.68 in 2006. The latter ratio showed a slight increase mainly due to an increase in the inventory value over this period of time.

Financial Performance ratios

The price earnings ratio was 18.57 in 2007 at Wal-Mart, the same as the industry average. At the same time, it was a bit higher than Target's, but lower than at Costco Wholesale Corporation.

In my opinion, all the changes were induced by the company's further development, which triggered new investments in its inventories, as well as in increasing its total assets value. Some of these have affected some….....

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