Balance sheet 1

On the other hand, towards the end of the fiscal year 2000 the current assets and current liabilities swelled in such a way that the amount of current liabilities surpassed the amount of the current assets. However, the increased assets values were explained by the input into new outlets and other supplementary cost, thus increasing the gross productive assets. Additionally, property plant and equipment values were not accounted for accumulated depreciation; instead its original value was added into the retained earnings. So, from a $4.4.02 billion level or 69.9 % in 1990, Wal-Mart’s gross productive assets rose to $45.348 billion or 84.1% in 2000 (Jablonsky & Basrsky, 2001). Apparently, from the perspective of a prospective investor and even the shareholders, the financial managerial decision to restructure the company balance sheet, which in a way is a perfect company valuation, is successful.

Moreover, Riahi-Belkaoui in 1999 understood Wilson’s observation on the complimentary performance of stocks in the event that cash flows would show huge values as in the case of WAL-Mart’s restructured financial statement, and vice-versa. Additionally, the reputation built by Wal-Mart with its restructured balance sheet (Jablonsky & Basrsky, 2001) may give the company a competitive edge, which apparently investors consider as a factor in determining a firm value (Riahi-Belkaoui, 1999).

Balance sheet

Another feature in the restructured balance sheet which makes it different from a regular balance sheet is that of financing and investment activities. Cash receivables, inventory, and supplementaries constitute the short term investments for the current assets. On the other hand, account payable, current debt due to creditors, and supplementary accrued liabilities constitutes the short term financing for the current liabilities. So that in cases when the difference between the two is a negative value, then there exist a deficit. This deficit is usually funded by long-term sources of long-term investments in working capital to avoid company demise (Jablonsky & Basrsky, 2001).

Along the premise that a minimal long-term source of long-term investments in working capital is required to cover deficits, Wal-Mart financial managers must have decided to lessen the working capital, such that in 2000 $1.447 billion was allocated for it instead of the $1.867 billion which was allocated working capital in 1990.

Financial decisions and Corporate valuations 2

“Wal-Mart Restructured Balance Sheets (for the Fiscal Years Ended January

31, 1990 and 2000 – Amounts in Million)” (Jablonsky & Basrsky, 2001)

	1990	Change	2000
Long-Term Investment
Current Assets
Cash and Equivalents	$13	$1,843	$1,856
Receivables	$156	$1,185	$1,341
Inventory	$4,428	$15,365	$19,793
Other	116	$1,250	$1,366
Total Current Assets	$4,713	$19,643	$24,356
Current Liabilities
Accounts Payable	$1,827	$11,278	$13,105
Accrued Liabilities	$995	$9,618	$10,613
Current Debt Due	$24	$2,061	$2,085
Total Current Liabilities	$2,846	$22,957	$25,803
Working Capital	$1,867	($3,314)	($1,447)
Gross Productive Assets
Property, Plant, And Equipment	$4,402	$40,946	$45,348
Gross Other Assets
Other Assets	$55	$9,969	$10,024
Total Long-Term Investment	$6,324	$47,601	$53,925
Long-Term Financing
External Debt Financing
Long-Term Debt	$185	$13,487	$13,672
Long-Term Lease Obligations	$1,087	$1,915	$3,002
Minority Interest	$0	$1,279	$1,279
Total External Debt	$1,272	$16,681	$17,953
External Equity Financing
Common Stock	$273	$923	$1,160
Stock Repurchases	$0	($3,105)	($3,105)
Total External Equity	$273	($2,182)	($1,945)
Total External Debt	$1,272	$16,681	$17,953
Internal Equity Financing
Retained Earnings	$3,728	$21,401	$25,129
Accumulated Depreciation	$972	$8,407	$9,379
Deferred Income Taxes and Other	$115	$644	$759
Stock Repurchases	$0	$3.105	$3,105
Other Equity Adjustments	$0	($455)	($455)
Total Internal Equity	$4,815	$33,102	$37,917
Total Long-Term Financing	$6,324	$47,601	$53,925

Source: Jablonsky & Basrsky, 2001

The figures in the restructured balance sheet noticeably do not necessarily show the itemized account of the long-term investment as well as the financing strategy. However, four financial managerial activities can be readily assumed. One, the financial manager of the company made a long-term investment amounting to $47.6 billion. Two, the financial manager got a long-term financing of equal amount. Three, to have a working capital, the financial manager of the company decided to subtract current liabilities from current assets, which difference is significant to cover the daily operational company expenditures. Four, the financial manager decided to incorporate current assets and current liabilities to come up with a bottom-line company long-term investment asset (Jablonsky & Basrsky, 2001).

Financial decisions and Corporate valuations 1

Financial Decisions and Corporate Valuations

Reflecting upon Wal-Mart’s financial statement, the financial managers apparently rendered financial decisions which may have cost the jobs of some employees. Nonetheless, financial growth and development in the business entity are usually expected. Thus, to meet the needs for expansions, shift becomes a proactive option. So, Wal-Mart’s financial managers must have shifted by availing of long-term financing to do long-term investment. In this connection, the idea of Gregory Bateson according to Jablonsky & Basrsky in 2001 was utilized. This was the restructuring of the balance sheet.

This restructured balance sheet now contains: “1) the long term investment section with the working capital, gross productive assets, and gross assets; 2) the long term financing section with external debt financing, external equity financing, and internal equity financing; and 3) internal equity financing equals retained earnings plus several score-keeping adjustments that have been added back to retained earnings” (Jablonsky & Basrsky, 2001).