Question

Using the ratios and information given for Wal-Mart Stores, Inc., a retailer, analyze the short-term liquidity and operating efficiency of the firm as of January 31, 2014.

Financial ratios for the years ended January 31,	2014	2013
Liquidity
Current (times)	0.88	0.83
Quick (times)	0.24	0.22
Cash flow liquidity (times)	0.44	0.46
Average collection period	6 days	6 days
Days inventory held	46 days	46 days
Days payable outstanding	38 days	40 days
Cash conversion cycle	14 days	12 days
Activity
Fixed asset turnover (times)	4.10	4.09
Total asset turnover (times)	2.31	2.29
Other information
Cash flow from operations (in millions of $)	23,257	25,591
Revenues (in millions of $)	473,076	465,604

Answer 1

Over the period liquidity position of the company has strengthen from 2013 to 2014.Few indicators of this are-

Increase in Current ratio

Increase in Current ratio

However Cash flow liquidity has declined it may so happen that company has invested in a new plant or fixed asset which may generate cash in future.So it is not a matter of concern.

A shorter days payable outstanding indicate quick outflow of cash.However increasing current ratio is a sign which show there could be decline in trade payable or increase in current assets which is good for the business.

Though the performance has improved in short term but still liquidity condition is not satisfactory overall because

1)Current Ratio<2

2)Liquidity Ratio<1

3)Cash Flow liquidity<1

Considering the improvement in current ratio,quick ratio,fixed asset turnover ratio and total asset turnover ratio are indicating company Operating efficiency has improved from 2013 to 2014.However company is still lagging behind and need to improve the above ratios.