fin370 week 2 team paper walmart ethics and compliance

Running Head: ETHICS AND COMPLIANCE PAPER 1

Ethics and Compliance Paper

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FIN370

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Instructor Name


Ethics and Compliance Paper

Today’s businesses descend on two things we all can recount for and that is a

mission and vision. If you had a few minutes to browse any business website you would most

likely find it on the first pages of the site. This mission and vision statement gives an outlook on

what the anticipated product or service the company will provide its customers and stakeholders.

Yes, all businesses promise to have the best product of its kind or the best service of its aptitude,

but when you dig a little deeper into the company’s financial health, things become more

realistic. There are many things disclosed about a company by just taking a look at yahoo.com or

other websites who tell the truth about the mission and vision statement of the company.

Assess the role of ethics and compliance in your organizations financial environment

According to Wal-Mart.com,

Wal-Mart requires honest and accurate recording and reporting of financial information

in order to make responsible business decisions. All financial books, records, and

accounts must accurately reflect financial transactions and events. They must conform to

generally accepted accounting principles, and to Wal-Mart’s system of internal controls.

No Walmart document or record may be falsified for any reason. No undisclosed or

unrecorded accounts of Wal-Mart’s funds or assets may be established for any purpose

(para. 1).

Describe procedures your organization has in place to ensure ethical behavior.

The Wal-Mart Code of Ethics centers around three principles and they are;

Respect for the Individual, Service to the Customer and Striving for Excellence. Nevertheless,.


The main goal is to promote integrity within the company and provide education amongst

employees. This includes developing and upholding Wal-Mart’s policies for ethical behavior.

Through ethics education Wal-Mart raises awareness, this education is integrated within their

training program. Walmart has implemented this program in the U.S. and continues to expand

its electronic and instructor led program around the world to reach those stakeholders employed

overseas. These expectations are not only for the employees but, Wal-Mart suppliers must also

be compliance with the standards set forth by the Wal-Mart Global Ethics Office. This help

suppliers understand the importance and equip them with the tools needed to follow these

expectations. Each supplier is presented with the Standards for Suppliers Manual.

Explain how financial markets within the United States

The financial market of the United States is commonly known as a capital market.

A capital market is contains trading for long-term tradable assets (Titman, Keown, & Martin,

2011). In a capital market investors place portions of wealth into long-term investments, which

are in the form of stocks and bonds. The capital market is split into a primary market and

secondary market (Titman et al., 2011). The primary market is the place new securities are sold

for companies to finance business (Titman et al., 2011). In the primary market a company sells

the initial stock or bond to finance the company’s business. These funds go directly to the

company but carry a weighted cost of capital. It is similar to paying interest on a loan.

Shareholders require some sort of return on this investment. Without the possibility of growth

the market is null. The securities from the primary market trade in the secondary market between

other entities (Titman et al., 2011). Therefore, the companies do not receive the money from

these trades. The secondary market trades ownership of securities between different entities.


Identify processes the organization uses to comply with SEC regulations.

The Securities and Exchange Commission (SEC) is a federal agency that helps

monitor and supervise the exchange of securities to protect all the investors against malpractice,

for example insider trading. The Securities and Exchange Commission not only supervises the

exchange of securities; it regulates the issues and transactions in securities while prosecuting all

illegal stock manipulations. “The SEC is responsible for implementing a series of regulatory

initiatives required under the Dodd-Frank Wall Street Reform and Consumer Protection Act”

(U.S. SEC, 2013).

Wal-Mart being the well-established and successful corporation that has hundreds

of stores operating worldwide has a rough task of meeting SEC regulations. Wal-Mart employs

over 2.1 million associates worldwide, including approximately 1.4 million associates in the

United States (U.S. SEC, 2013). Due to the high volume of associates working for Wal-Mart,

SEC compliance is handled with strict processes to ensure the organization remains within SEC

regulations. The company is also at stake and responsible for its business operations and its

employees.

Wal-Mart has to have the ability to ensure that the entire corporation is run

properly. Upon our team’s review of Wal-Mart’s financial records, we found that the company

keeps proxy statements, definitive additional proxy soliciting materials (which allows Wal-Mart

to post and show their proxy materials over the Internet), and annual reports for security holders.

Quarterly reports also provide a continuing view of the company’s financial position were also

filed as well as a notice of exempt solicitation, reports of unscheduled material events or


corporate events, and statements of changes in beneficial ownership of securities. These are all

documents needed to maintain the company within SEC guidelines.

In addition to these documents, the holder of records of shares, for Wal-Mart

stores, must attend the Annual Shareholder’s meeting. In this meeting, the Board requires

everyone to cast their votes for or against the shareholders proposals. Wal-Mart must

continually take steps and follow guidelines to stay in compliance with SEC regulations. The

regulations helps Wal-Mart minimize conflict of interest that often arises in complex global

corporations

Evaluate your organization’s financial performance during the past 2 years, using financial ratios. Calculate the ratios for each year: Current, Debt, Return on equity, Days receivable

Current Ratio

According to Titman, Keown, and Martin, we can, “assess a firm’s overall liquidity by

comparing its current (liquid) assets to its current (short-term) liabilities. 2011, p. 80). The

Current Ratio= Current Assets/Current Liabilities.

As of the period ending January 31, 2012, Wal-Mart’s total current assets equal

$59,975,000 and their total current liabilities equal $62,300,000 (Walmart Balance Sheet, 2013).

Hence, their Current Ratio is 0.882424.

As of the period ending January 31, 2013, Wal-Mart’s total current assets equal

$59,940,000 and their total current liabilities equal $71,818,000 (Walmart Balance Sheet, 2013).

Hence, their Current Ratio is 0.83461.


Debt Ratio

We calculate the firm’s debt ratio as total liabilities divided by total assets.”

(Titman, Keown, and Martin, 2011, p. 85). The Debt Ratio= Total Liabilities/Total Assets.

As of the period ending January 31, 2012, Wal-Mart’s total liabilities equal $121,687,000

and their total assets equal $193,406,000 (Walmart Balance Sheet, 2013). Hence, their Debt

Ratio is 0.629179.

As of the period ending January 31, 2013, Wal-Mart’s total liabilities equal

$126,243,000 and their total assets equal $203,105,000 (Walmart Balance Sheet, 2013). Hence,

their Debt Ratio is 0.621565.

Return on Equity

According to Titman, Keown, and Martin, “a firm’s net income consists of the

earnings it has left over after its interest expense has been paid. These are the earnings available

for distribution to the firm’s shareholders. When net income is divided by the dollar amount of

equity, we get the accounting return on the common stockholders’ investment, or the return on

equity (frequently shortened to ROE)” (Titman, Keown, and Martin, 2011, p. 93). Return on

Equity= Net Income/Common Equity.

As of the period ending January 31, 2012, Wal-Mart’s net income equals

$15,699,000 and their common equity equals $71,315,000 (Walmart Income Statement, 2013).

Hence, their Return on Equity= is 22.01%.

As of the period ending January 31, 2013, Wal-Mart’s net income equals

$16,999,000 and their common equity equals $76,343,000 (Walmart Income Statement, 2013).

Hence, their Return on Equity= is 22.26%.


Days Receivable

A firm’s receivables can be analyzed using two key ratio metrics. Titman, Keown,

and Martin state, “we can measure how many days it takes the firm to collect its receivables by

computing its average collection period” (Titman, Keown, and Martin, 2011, p. 81). Average

Collection Period= Accounts Receivables/Daily Credit Sales. Titman, Keown, and Martin

elaborate, “we can reach the same conclusion by measuring how many times accounts receivable

are “rolled over” during a year, using the accounts receivable turnover ratio,” (Titman, Keown,

and Martin, 2011, p. 81). Accounts Receivable Turnover= Annual Credit Sales/Accounts

Receivables.

For the quarterly period ending July 31, 2012, Wal-Mart’s Average Collection Period

was 4 and their Accounts Receivable Turnover ratio was 85.19 (Walmart Accounts Receivable

Turnover Ratios, 2013).

For the quarterly period ending July 31, 2013, Wal-Mart’s Average Collection

Period was 5 and their Accounts Receivable Turnover ratio was 77.15 (Walmart Accounts

Receivable Turnover Ratios, 2013).

Discuss the trend for each ratio and what it tells you about the organization’s financial

health

As we know, the debt ratio shows what percentage of the company’s assets was

financed. In order to find this percentage, divide total liabilities (short and long term) by total

assets. This results in the percentage of financed debt; the smaller the percentage is the better it

looks for the company. This means they won most of their assets. Once the percentage is

calculated, it can be compared only to previous years’ results. It also can be compared to other

companies to see how their debt relates to the debt of other companies. This is a good ratio for


potential investors because it gives them an idea of how the company may fair in a financial

downturn.

Return on equity shows how much return an investor will make from the net

income of the company. To get this percentage net income is divided by common equity.

Common equity is calculated by subtracting preferred equity form stakeholders equity. A higher

percentage means a higher return for investors. Is ratio is important for companies and investors;

it shows the performance of the company. When a company has a higher return on equity, they

are more likely to attract investors.

Day’s receivable refers to how many days revenue sits in accounts receivables.

Here are two things to know before performing calculation: revenue at a particular point and

revenue generated over a length of time. To calculate the ratio, first divide the revenue by the

number of days in the period to get the average daily revenues. Next, divide accounts receivable

by that number, this gives the amount of time the balance remains in accounts receivable before

the company receives cash for it. The faster the company is paid, the faster it can use the funds to

purchase other materials or pay back some of its debt. This is important ratio for companies

because it helps them look into new ways to expedite receipt of payment.


Reference

Hutchinson, J. (2013). Days in Account Receivable Ratio. Retrieved form

http://suite101.com/article/days-in-accounts-receivable-ratio-a88602.

(n.d). Retrieved from http://corporate.walmart.com/our-story/ethics-integrity.

(2013). Retrieved from www.sec.gov.

(n.d). Retrieved from https://walmartethics.com.

Titman, S., Keown, A. J., & Martin, J. D. (2011). Financial management: Principles and

applications (11th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

https://walmartethics.com/

http://www.sec.gov/

http://corporate.walmart.com/our-story/ethics-integrity

http://suite101.com/article/days-in-accounts-receivable-ratio-a88602

fin370 week 2 team paper walmart ethics and compliance

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