Financial Accounting

Find and read the of the company , including the type of business it is in . Why is gaining an understanding of the industry and type of business an important starting point for financial statement analysis

Company the type of Business

Wal-Mart is the largest chain of discount retail stores in the world . It is an American public corporation and is also rated by Forbes fortune 500 as the world 's largest public corporation by revenue

It was founded in 1962 by Sam Walton , and its philosophy was to act as a

means of discount retail store enabling people to save their money Later on it was incorporated as Wal-Mart Stores , Inc . on October 31 1969 . It was soon listed on the New York Stock Exchange soon after it had begun trading stocks as a publically held company on October 1 1972

The company has still been following the same philosophy as it has been offering products at lower prices as compared to any other competitor Wal-Mart has been successful over its competitors mostly because it has been able to generate huge amount of sales earning a very small amount of profit earned on each unit , and hence they have been achieving economies of scale regularly

Retail industry has evolved over the years and it has brought extravagant changes in the process of manufacturing and distributing goods . Most of the developed countries have a very strong retail industry and the competition is very stiff

Retailing is basically selling of purchased and finished goods originally produced by some other company from a fixed location such as a departmental store (incase of Wal-Mart ) or even a kiosk . The process of distribution or the supply chain generally evolves around the manufacturer , whole-seller and the retailer . A retailer may directly buy goods or merchandise from the manufacturer in bulk quantity , or it may have to buy it through a whole-seller depending on the company 's strategy with respect to the distribution of its goods and services

The importance in Financial statement analysis

There could be several reasons which signify the fact that it is gravely essential for one to understand the business or the industry in to understand the financial statements better . Some of them may be

Financial statements may include industry specific ratios . For example incase of banks it may include the Spread ratio , etc

Some ratios may be interpreted differently in different industries like , when comparing manufacturing businesses with service providing businesses

Intra-company comparison will only make true sense if one is aware of how the business operates

Only if one knows the industry will he understand the different accounts mentioned in the company financial statements

What are the primary sources of cash in your company for the last fiscal year

This can be divided into two major classes

Cash flow from investing activities

Proceeds from disposal of property and equipment

Proceeds from disposal of certain international operations

Cash flow from financing activities

Proceeds from issuance of long-term debt (Annual...