Refer to Wal-Mart's Financial Statements, Below $\$ 0.10$ Par Value; 100 Share Authorized

question 85

Essay

Refer to Wal-Mart's financial statements, below.
Shareholders' Equity
Preferred stock ( $\$ 0.10$ par value; 100 share authorized. none issued)

Common stock ( $\$ 0.10$ par value; 5.500 million shares authorized. 2,285 million and 2,293 million issued and
$\begin{array}{lr} \text { outstanding in 1997 and 1996, respectively) } &228&229\\ \text {Capital in excess of par value } &547&545\\ \text { Retained earnings} &16,768&14,394\\ \text { Foreign currency translation adjustment} &\underline{(400)}&\underline{(412)}\\ \text { Total shareholders' equity } &\underline{17,143}&\underline{14,756}\\ \text { Total liabilities and shareholders' equity } \underline{\underline{\$39,604}}&\underline{\underline{\$37,541}}\\\end{array}$

a. Calculate: total debt to equity ratio and times interest earned ratio for fiscal X6 and X7. Comment on your results.

b. Analysis of Wal-Mart's footnotes reveals the existence of significant operating leases. Explain whether this would change your answer in part a) and how you would make the changes.

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Definitions:

Actual Output

The real quantity of goods or services produced by a company, as opposed to planned or expected output.

Standard Variable Overhead Rate

The rate used in budgeting and costing that applies variable overheads to a specific activity basis such as labor hours.

Direct Labour Hours

The aggregate hours employees devoted to the process of production have logged.

Variable Overhead

Costs that vary with the level of output, such as utilities and labor, as opposed to fixed overheads.