Question

Integrative Case 6.1: Walmart (Questions a–c)

1. Given your knowledge of Walmart’s key success and risk factors, use the note information described above to evaluate Walmart’s accounting quality.

Based on their financials, Walmart has strong accounting quality. Their business has seen increased success over this time frame and their ratios have improved for the most part.

2. If you believe that Walmart’s accounting policy does not yield measurements of assets and liabilities that reflect economic reality and a measurement of net income that is predictive of future earnings, suggest any changes that you would make to assets, liabilities, and earnings to improve accounting quality. (At this point in your learning process, if you do not have specific numerical adjustments to propose, at least describe potential journal entries you would make to change the financial statements, if any, and what information you might need to make those entries.)

3. Evaluate whether your proposed adjustments are necessary for (1) credit analysis and (2) equity valuation.

Answer 1

Brief information about the company:

Wallmart Inc vis engaged in global operations of retail, wholesale and other units, as well as eCommerce, located throughout the U.S., Africa, Argentina, Canada, Central America, Chile, China, India, Japan, Mexico and the United Kingdom, as well as Brazil.

Success Factors: Making life easier for busy families & commitment to price leadership as well as increasing convenience to save our customers time. By leading on price, Wallmart have earnt the trust of customers by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"). Everyday low cost ("EDLC") is their commitment to control expenses so wallmart can pass cost savings to customers

Customer Services :Enormous efforts on customer services

Risk Factors:Strong competition makes things better for company and their customers. Wallmart e-commerce business is larget contributor so any technology failure may hamper overall business result.

Assets Accounting : No change

Liabilities Accounting : There are number of ongoing legal proceeding and tax proceeding going on. The company might be providing for this in consultation with Auditor however often it is the case that listed entities do not provide enough so as to no impact the performance hence the provision for this should be on conservative basis.

Revenues: No Chande

Inventories: No Change

Property plant and equipment: No change

Intangible assets: No change

2)Evaluate whether your proposed adjustments are necessary for (1) credit analysis and (2) equity valuation.

All the accounting policies as of now are in sound position. No need of any changes for credit analysis and equity valuation.