Question #1
Firms grant credit to customers as a way to increase sales. However, granting credit also exposes the firm to the risk of uncollectible accounts. List and describe three actions a firm can take to reduce the risk of bad debt expense. For each action listed, describe the potential costs involved with these steps.
Question #2
You have been hired by the CEO of a soon-to-be-opened bookstore to develop procedures to help control inventory. List, describe, and defend three procedures you recommend be implemented to control inventory. As part of your response, be sure to describe any potential costs associated with these procedures.
Question #3
a) Using the Wal-Mart, Inc. financial statements provided on Blackboard, calculate and interpret the days to collect ratio. Assume all sales are credit sales.
Question #4
Using the Wal-Mart, Inc. financial statements provided , calculate and interpret the days to sell and gross profit ratios.
| WAL MART STORES INC | |||||||||
| Income Statement | |||||||||
| (Amounts in millions except per share data) |
|||||||||
| Fiscal Year Ended January 31, | 2013 | 2012 | 2011 | 2010 | |||||
| Revenues: | |||||||||
| Net sales | $4,66,114 | $4,43,854 | $4,18,952 | $4,05,132 | |||||
| Membership and other income | 3,048 | 3,096 | 2,897 | 2,953 | |||||
| 4,69,162 | 4,46,950 | 4,21,849 | 4,08,085 | ||||||
| Costs and expenses: | |||||||||
| Cost of sales | 3,52,488 | 3,35,127 | 3,14,946 | 3,04,106 | |||||
| Operating, selling, general and administrative expenses |
88,873 | 85,265 | 81,361 | 79,977 | |||||
| Operating income | 27,801 | 26,558 | 25,542 | 24,002 | |||||
| Interest: | |||||||||
| Debt | 1,977 | 2,034 | 1,928 | 1,787 | |||||
| Capital leases | 274 | 288 | 277 | 278 | |||||
| Interest expense | 2,251 | 2,322 | 2,205 | 2,065 | |||||
| Interest income | -187 | -162 | -201 | -181 | |||||
| Interest, net | 2,064 | 2,160 | 2,004 | 1,884 | |||||
| Income from continuing operations before income taxes |
25,737 | 24,398 | 23,538 | 22,118 | |||||
| Provision for income taxes: | |||||||||
| Current | 7,999 | 6,742 | 6,703 | 7,643 | |||||
| Deferred | -18 | 1,202 | 876 | -487 | |||||
| Total provision for income taxes |
7,981 | 7,944 | 7,579 | 7,156 | |||||
| Income from continuing operations |
17,756 | 16,454 | 15,959 | 14,962 | |||||
| Income (Loss) from discontinued operations, net of tax |
0 | -67 | 1,034 | -79 | |||||
| Consolidated net income | 17,756 | 16,387 | 16,993 | 14,883 | |||||
| Consolidated net income attributable to noncontrolling interest |
-757 | -688 | -604 | -513 | |||||
| Consolidated net income attributable to Walmart |
$16,999 | $15,699 | $16,389 | $14,370 | |||||
| Net income per common share: | |||||||||
| Basic income per common share from continuing operations to Walmart |
$5.04 | $4.56 | $4.20 | $3.74 | |||||
| Basic income (loss) per common share from discontinued operations |
$0.00 | ($0.02) | $0.28 | ($0.02) | |||||
| Basic net income per common share attributable to Walmart |
$5.04 | $4.54 | $4.48 | $3.72 | |||||
| Diluted income per common share from continuing operations to Walmart |
$5.02 | $4.54 | $4.18 | $3.73 | |||||
| Diluted income (loss) per common share from discontinued operations |
$0.00 | ($0.02) | $0.29 | ($0.02) | |||||
| Diluted net income per common share |
$5.02 | $4.52 | $4.47 | $3.71 | |||||
| Weighted-average number of common shares: |
|||||||||
| Basic | 3,374 | 3,460 | 3,656 | 3,866 | |||||
| Diluted | 3,389 | 3,474 | 3,670 | 3,877 | |||||
| Dividends declared per common share |
$1.59 | $1.46 | $1.21 | $1.09 | |||||
