Essay About Wal-Mart And Constant Cogs

Wal-Mart Financial Analysis
Essay Preview: Wal-Mart Financial Analysis
Report this essay
Income Statement
Examination
Cost of Goods Sold:
Over the period of 2002-2005, Cost of Goods Sold (COGS) as a percentage of sales
decreased from 78% to 76%. The constant COGS explains that Wal-Mart has settled
with the over 4 million deliveries to each store they make each year. With such a
constant rate over a 4 year period, Wal-Mart has not found any new technique that has
lessened the cost of transporting their goods from assembly line to shelf.
Gross Profit:
Gross profit is the difference between sales and cost of goods sold. Over the period of
2002-2005, gross profit has increased from 21% of sales to 23% of sales. Because both
net sales and COGS have risen proportionally, gross profit has not fluctuated.
Operating Expenses:
Wal-Mart includes Depreciation and Amortization in its Operating Expenses for purposes
of reporting on the Income Statement. Operating expenses have grown from 16% to 17%
of sales from 2002-2005. Because of the mass revenue that Wal-Mart generates,
operating expenses will be a small percentage of sales. Although Wal-Mart has
numerous expenses, their revenue will always dwarf their expenditures. One of the main
reasons for Wal-Mart continued success in the retail industry can be summed up in the
fact that their expenses are only 17% of sales. That generates a high expense turnover.
Depreciation and Amortization:
Over the last 4 years, depreciation and amortization has increased 9.25% each year.
Depreciation and amortization for financial statement purposes are provided on the
straight-line method over the estimated useful lives of the various assets. The useful lives
of equipment at Wal-Mart are 5-50 years. This growth of depreciation expenses shows
how much Wal-Mart is growing. Every year, Wal-Mart