When it comes to making decisions, Fortune 500 companies rely heavily on their balance sheets and income statements. A balance sheet is a “statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period” ("Accounting Tools", 2017). An income statement is “a financial statement that reports a company’s financial performance over a specific accounting period” ("Accounting Tools", 2017). To gain a better understanding of the financial statements used for corporate financial reporting and the key ratios used to make business decisions a review of the Fortune 500 company Wal-Mart was selected in order to evaluate their current ratio, quick ratio, debt equity ratio, inventory turnover ratio, receivables turnover ratio, total assets turnover ratio, profit margin ratio, and lastly, return on assets ratio. The current ratio is very important to Wal-Mart because it measures its ability to pay short and long-term obligations. Wal-Marts current ratio came out to be 1.72:1 by dividing the total assets by the total liabilities. Quick ratio is important because it determines how well a company can meets it short-term liabilities. By adding cash, cash equivalents, short-term investments, current …show more content…
The debt equity ratio is determined by dividing total liabilities by stockholders equity. It was determined that Wal-Marts debt equity ratio came out to 1.44:1. The inventory turnover ratio determines how efficient Wal-Mart is good at managing their inventory. By dividing the cost of goods by the average inventory it is determined that Wal-Marts inventory turnover ratio is 0.75:1. The receivables turnover ratio is important because it determines how well Wal-Mart uses its assets. By dividing net credit sales by average accounts receivables it was determined that the receivables turnover ratio is