Wal-Mart: Using Investments to One's Advantage Return Term Paper

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Wal-Mart:

Using Investments to One's Advantage

Return on Assets & Return on Equity

A return on assets (ROA) ratio is a way for a company to recognize how profitable it is in accordance with its total assets. This formula allows for the company to observe how efficient their management team is at using its assets in a way that will generate more generous earnings for the company and the shareholders. The formula, a favorite to investors, can easily be determined by taking the company's net income and dividing it by its total assets (Crosson, et al., 2008).

The return on equity (ROE) ratio is the amount of net income that is returned as a percentage of the shareholders' equity (Loth, 2011). This formula, also a favorite to investors, measures a company's ability to be profitable by showing how much money the company is able to generate with shareholder investments (Loth, 2011).

Why ROA & ROE are Significant to Wal-Mart

As a publicly traded company, Wal-Mart should be concerned about their ROA and ROE ratios for a variety of different reasons. First, these ratios allow the company to evaluate their performance on a yearly basis. The ratios are able to advise Wal-Mart's management team as to what functions of the business operations are functioning in ways that benefit the company, and which recent changes have been less efficient for the company.

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Secondly, Wal-Mart is able to compare themselves with other businesses within their industry to observe if they are successfully or if they should seek improvement. Because these are two ratios that educated investors seek to know, Wal-Mart will want to make sure it is able to compete within their industry.

3.0 Wal-Mart's Investments

One of Wal-Mart's most current investments has been the expansion to Argentina. Wal-Mart intends on opening over ten new stores in the country. This will create nearly 2,000 jobs for Argentineans, and at the same time it will create a new source of income for Wal-Mart Corporation. While the company has not seen a large return on this investment, it predicts a great return in its future. Once the Argentinean Wal-Marts are able to make profits, the company intends on being just as successful in Argentina as it is in other South American countries.

4.0 Personal Investments

Personally, I invest by using the concept of spreading savings into different types of investments. As a young person, I understand that I have a great deal of time before I retire, and therefore, I have a fair amount of time to invest in more risky investments. However, because of my personal investment….....

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