Refer to the financial statements for Wal*Mart, below

Wal"Mart

(in millions)

Consolidated Statements of Operations

Fiscal Year Ended

31-Jan X2 31-Jan X3 31-Jan X4 31-Jan X5 31-Jan X6 31-Jan X7 31-Jan X8

Net sales $ 43,887 $ 55,484 $ 67,345 $ 82,494 $ 93,627 $ 104,859

Rentals from licensed dept 28 36 47

Other income-net 374 465 593 918 1,122 1,287

Total revenues 44,289 55,985 67,985 83,412 94,749 106,146 118,884

Cost of sales 34,786 44,174 53,444 65,586 74,564 83,663

Operating, Selling, General& Administrative Expenses 6,684 8,321 10,333 12,858 14,951 16,788

Total operating expenses 41,470 52,495 63,777 78,444 89,515 100,451

Operating income 2,819 3,490 4,208 4,968 5,234 5,695 6,378

Interest costs

Debt 113 143 331 520 692 629

Capital leases 153 180 186 186 196 216

266 323 517 706 888 845 930

Income before taxes 2,553 3,167 3,691 4,262 4,346 4,850 5,449

Income tax expense

Current 906 1,137 1,325 1,572 1,530 1,974

Deferred 39 35 33 9 76 (180)

945 1,172 1,358 1,581 1,606 1,794 2,016

Net income $ 1,608 $ 1,995 $ 2,333 $ 2,681 $ 2,740 $ 3,056 $ 3,433

EPS $ 0.70 $ 0.87 $ 1.02 $ 1.17 $ 1.19 $ 1.33

Dividends per share (for the whole year) $ 0.09 $ 0.11 $ 0.13 $ 0.17 $ 0.20 $ 0.21

$\begin{array}{|l|r|r|} \hline\text{Shareholders' Equity}&&\ \hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\ \hline\text{Common stock ( $ \$ .10 $ par value; 5,500 shares}&&\ \text{authorized. 2,285 and 2,293 issued and outstanding in}&&\ \hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \ \hline \text { Capital in excess of par value } & 547 & 545 \ \hline \text { Retained earnings } & 16,768 & 14,394 \ \hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \ \hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \ \hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \ \hline \end{array}$ a. Calculate for X7 the ratios listed below. X6 numbers are provided for comparative purposes. $$\begin{array} { | l | r | r | } \hline & \underline { \mathbf { X } 6 } & \underline { \mathbf { X } 7 } \ \hline \text { Inventory turnover } & 4.96 & \ \hline \text { Days inventory outstanding } & 73.56 & \ \hline \text { Accounts receivable turnover } & 120.58 & \ \hline \text { Days receivable outstanding } & 3.03 & \ \hline \text { Payables turnover } & 12.39 & \ \hline \text { Days payables outstanding } & 29.46 & \ \hline \text { Length of operating cycle } & 76.58 & \ \hline \text { Length of cash cycle } & 47.12 & \ \hline \text { Current ratio } & 1.51 & \ \hline \text { Quick ratio } & 0.12 & \ \hline \end{array}$$ b. Working capital management is an important consideration for many companies. Which component of Wal*Mart's working capital do you think it spends most time managing? That is, which component is likely to be the most important? Why? What has happened to this component from X6 to X7?

Question

Refer to the financial statements for Wal*Mart, below

Wal"Mart (in millions)	Consolidated Statements of Operations Fiscal Year Ended
	31-Jan X2	31-Jan X3	31-Jan X4	31-Jan X5	31-Jan X6	31-Jan X7	31-Jan X8
Net sales	$ 43,887	$ 55,484	$ 67,345	$ 82,494	$ 93,627	$ 104,859
Rentals from licensed dept	28	36	47
Other income-net	374	465	593	918	1,122	1,287
Total revenues	44,289	55,985	67,985	83,412	94,749	106,146	118,884
Cost of sales	34,786	44,174	53,444	65,586	74,564	83,663
Operating, Selling, General& Administrative Expenses	6,684	8,321	10,333	12,858	14,951	16,788
Total operating expenses	41,470	52,495	63,777	78,444	89,515	100,451
Operating income	2,819	3,490	4,208	4,968	5,234	5,695	6,378
Interest costs
Debt	113	143	331	520	692	629
Capital leases	153	180	186	186	196	216
	266	323	517	706	888	845	930
Income before taxes	2,553	3,167	3,691	4,262	4,346	4,850	5,449
Income tax expense
Current	906	1,137	1,325	1,572	1,530	1,974
Deferred	39	35	33	9	76	(180)
	945	1,172	1,358	1,581	1,606	1,794	2,016
Net income	$ 1,608	$ 1,995	$ 2,333	$ 2,681	$ 2,740	$ 3,056	$ 3,433
EPS	$ 0.70	$ 0.87	$ 1.02	$ 1.17	$ 1.19	$ 1.33
Dividends per share (for the whole year)	$ 0.09	$ 0.11	$ 0.13	$ 0.17	$ 0.20	$ 0.21

$\begin{array}{|l|r|r|} \hline\text{Shareholders' Equity}&&\ \hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\ \hline\text{Common stock ( $ \$ .10 $ par value; 5,500 shares}&&\ \text{authorized. 2,285 and 2,293 issued and outstanding in}&&\ \hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \ \hline \text { Capital in excess of par value } & 547 & 545 \ \hline \text { Retained earnings } & 16,768 & 14,394 \ \hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \ \hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \ \hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \ \hline \end{array}$ a. Calculate for X7 the ratios listed below. X6 numbers are provided for comparative purposes. $$\begin{array} { | l | r | r | } \hline & \underline { \mathbf { X } 6 } & \underline { \mathbf { X } 7 } \ \hline \text { Inventory turnover } & 4.96 & \ \hline \text { Days inventory outstanding } & 73.56 & \ \hline \text { Accounts receivable turnover } & 120.58 & \ \hline \text { Days receivable outstanding } & 3.03 & \ \hline \text { Payables turnover } & 12.39 & \ \hline \text { Days payables outstanding } & 29.46 & \ \hline \text { Length of operating cycle } & 76.58 & \ \hline \text { Length of cash cycle } & 47.12 & \ \hline \text { Current ratio } & 1.51 & \ \hline \text { Quick ratio } & 0.12 & \ \hline \end{array}$$ b. Working capital management is an important consideration for many companies. Which component of Wal*Mart's working capital do you think it spends most time managing? That is, which component is likely to be the most important? Why? What has happened to this component from X6 to X7?

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The Answer of Refer to the financial statements for Wal*Mart, below

Wal"Mart (in millions)	Consolidated Statements of Operations Fiscal Year Ended
	31-Jan X2	31-Jan X3	31-Jan X4	31-Jan X5	31-Jan X6	31-Jan X7	31-Jan X8
Net sales	$ 43,887	$ 55,484	$ 67,345	$ 82,494	$ 93,627	$ 104,859
Rentals from licensed dept	28	36	47
Other income-net	374	465	593	918	1,122	1,287
Total revenues	44,289	55,985	67,985	83,412	94,749	106,146	118,884
Cost of sales	34,786	44,174	53,444	65,586	74,564	83,663
Operating, Selling, General& Administrative Expenses	6,684	8,321	10,333	12,858	14,951	16,788
Total operating expenses	41,470	52,495	63,777	78,444	89,515	100,451
Operating income	2,819	3,490	4,208	4,968	5,234	5,695	6,378
Interest costs
Debt	113	143	331	520	692	629
Capital leases	153	180	186	186	196	216
	266	323	517	706	888	845	930
Income before taxes	2,553	3,167	3,691	4,262	4,346	4,850	5,449
Income tax expense
Current	906	1,137	1,325	1,572	1,530	1,974
Deferred	39	35	33	9	76	(180)
	945	1,172	1,358	1,581	1,606	1,794	2,016
Net income	$ 1,608	$ 1,995	$ 2,333	$ 2,681	$ 2,740	$ 3,056	$ 3,433
EPS	$ 0.70	$ 0.87	$ 1.02	$ 1.17	$ 1.19	$ 1.33
Dividends per share (for the whole year)	$ 0.09	$ 0.11	$ 0.13	$ 0.17	$ 0.20	$ 0.21

$\begin{array}{|l|r|r|} \hline\text{Shareholders' Equity}&&\ \hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\ \hline\text{Common stock ( $ \$ .10 $ par value; 5,500 shares}&&\ \text{authorized. 2,285 and 2,293 issued and outstanding in}&&\ \hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \ \hline \text { Capital in excess of par value } & 547 & 545 \ \hline \text { Retained earnings } & 16,768 & 14,394 \ \hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \ \hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \ \hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \ \hline \end{array}$ a. Calculate for X7 the ratios listed below. X6 numbers are provided for comparative purposes. $$\begin{array} { | l | r | r | } \hline & \underline { \mathbf { X } 6 } & \underline { \mathbf { X } 7 } \ \hline \text { Inventory turnover } & 4.96 & \ \hline \text { Days inventory outstanding } & 73.56 & \ \hline \text { Accounts receivable turnover } & 120.58 & \ \hline \text { Days receivable outstanding } & 3.03 & \ \hline \text { Payables turnover } & 12.39 & \ \hline \text { Days payables outstanding } & 29.46 & \ \hline \text { Length of operating cycle } & 76.58 & \ \hline \text { Length of cash cycle } & 47.12 & \ \hline \text { Current ratio } & 1.51 & \ \hline \text { Quick ratio } & 0.12 & \ \hline \end{array}$$ b. Working capital management is an important consideration for many companies. Which component of Wal*Mart's working capital do you think it spends most time managing? That is, which component is likely to be the most important? Why? What has happened to this component from X6 to X7?