From the course: Corporate Financial Statement Analysis

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Example: Wal-Mart vs. Target

Example: Wal-Mart vs. Target

From the course: Corporate Financial Statement Analysis

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Example: Wal-Mart vs. Target

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- So we've used common size financial statements to analyze Uncertain Company, but will this same technique work with a real company? A real company like Walmart? Well, let's take a look at Walmart's income statement. Now, you see the income statement here in front of you. This is good, we have three years' worth of data, and you can see sales going up steadily, about $15 billion a year, awesome. Three years of side by side data are nice, but it would be really nice to know why is income so much lower in 2019? We can get huge insights very efficiently just by constructing a common size income statement for Walmart. And how do we do that, again? Just divide everything in the income statement by sales for that year. And we see down at the bottom, in 2019, net income as a percentage of sales, 1.4%. We've seen that before, we call that return on sales. In 2017, that same number is 2.9%. Why is it so much lower in 2018? The common size income statement tells us just like that. The gross…

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