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Ratio Analysis

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Annual reports and 10k from publicly held companies give the general public and more specifically the average investor a look into the financial make up of the entity. The information can be interpreted in any number of ways however there are generally accepted formulas and ratios that are used to gain insight into a companies financial past, present and possibly future. Using Federated Department Stores Inc. and Wal-Mart as examples, what do the 10Ks and annual reports tells us and what are some of the formulas and ratios that give investors information on the relative financial status of a company?

Federated Department Stores

Cash Generated

For the fiscal year ending January 31, 2004 the FDS had in increase in net cash by $209 million giving the cash for the end of the period of $925 million.

On the cash flow statement the net cash for the continuing operating activities FDS is showing a positive balance for cash at $1,590 million.

The investing activities were not as great as the operating activities unfortunately. With having a negative entry on property and equipment it left the net cash used by the continuing investing activities at a negative $562 million.

The financing activities came out in a positive state with $819 for the next cash used by continuing financing activities.

Significant internal events

Looking at the cash flow statement some significant internal events when you look at the continuing operations before financing activities FDS totaled more then $1 billion. This amount is almost double from the year prior. This enabled FDS to repurchased 16 million in shares of Federated common stock, cash dividends, and pay down over $450 million in debt and still have more then $900 million in cash.

Changes revenues and net incomes

Over the last three years FDS has seen operations go and new operations come. In

January 2002 the board of directors decided to dispose of the company Fingerhut. Fingerhut consisted of Arizona Mail Order, Figi;s, and a Popular Club Plan. Fingerhut generated $924 million in cash in 2002 after paying off $529 million in debts.

In July 2001 the company purchased a company by the name of Liberty House Inc. This department store operated 11 department stores and seven resorts. There was a specialty store in Hawaii and a department store in Guam. FDS bought Liberty House for $200 million this amount consisted of $183 million in cash and $17 million of indebtedness.

In January 2004 there was a decrease in merchandise inventory from $3,215 million from $3,459 in February 2003.

Current Ratio

The current ratio is found by dividing the company's current assets by their current liabilities. For Federated that is = 1.92

Return on Sales

Return on sales is net profit divided by sales or = .046

Earning Per Share (EPS)

Earnings per share or EPS is calculated by dividing net earnings by outstanding shares or


Debt Ratio

Debt ratio is long-term debt divided by long-term debt plus equity or = .35

Price Earnings Ratio

Price earnings ratio is the current stock price divided by EPS or = 16.48


Statement of Cash Flows

During the fiscal year ended January 31, 2004 Wal-Mart increased its net cash and cash equivalents by 2.441 billion dollars. This indicates that the company generated more cash receipts than cash payments during these twelve operating months. The company's cash and cash equivalents balance at the end of fiscal year 2004 totaled 5.199 billion dollars.

The cash flows generated from operating activities produced a net inflow of cash totaling 15.996 billion dollars. This includes 8.861 billion in income from continuing operations. Depreciation and amortization account for 3.852 billion dollars, accrued liabilities account for 1.8 billion and accounts payable for 2.658 billion dollars. The increase in inventories during the year reduced cash by 1.973 billion dollars.

The cash flows from investing activities produced a net outflow of cash in the amount of 8.312 billion dollars. The largest outlays in cash were due to payments for property, plant and equipment in the amount of 10.308 billion dollars. There was a positive cash flow of 1.5 billion dollars as proceeds from the sale of subsidiary McLane Company, Inc. Wal-Mart also disposed of fixed assets resulting in a 481 million dollar cash inflow to the company.

The cash flows from financing activities produced a net cash outflow in the amount of 5.563 billion dollars. The company issued long term debt in the amount of 4.099 billion dollars, and increased commercial paper in the amount of 688 million dollars. Wal-Mart also repurchased company stock creating an outflow of 5.046 billion dollars. The company paid 1.569 billion in dividends and retired long term debt in the amount of 3.541 billion dollars.

Wal-Mart paid out cash in the amount of 4.358 billion dollars for income taxes and 1.024 billion dollars in interest payments (Wal-Mart 10k).

Net Incomes

During the fiscal year of 2004, Wal-Mart earned income from continuing operations of $8.9 billion, a



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