Case Analysis:Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc. Essay

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Pages: 14

Case:Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc.
Financial Statement
Case analysis

1. How do the retailing strategies of Sears and Wal-Mart differ? How does each firm operate their business/attempt to create value?
The two companies differs in retailing strategy in two ways.

1. Credit sales boost sales greatly in Sears, not in Wal-mart
Since 1992 when Arthur C. Martinez was brought on board to head Sears’s retailing operations, credit sales, especially through the use of the company’s own proprietary credit card, boost the sales of the company greatly from 1993 to 1997. The new card accounts between 1993 and 1996 were increasing by roughly a 50% rate every year. Besides the company’s own credit cards, the third
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(1) The higher asset turnover of Walmart at 2.8074 over 1.1032 of Sears represents that the efficiency of Walmart to utilize same amount of assets to generate revenue is obviously higher than Sears. The gap can mainly be attributed to gross revenue, since the two marts shares nearly the identical total assets.

(2) There exists huge difference of leverage ratio, which indicates the financial structure of a firm, between Sears and Walmart. Greater use of debt financing increases financial leverage and, typically, risk to equity holders and bondholders alike. While leverage magnifies profits when the returns from the asset more than offset the costs of borrowing, losses are magnified when the opposite is true. A corporation that borrows too much money might face bankruptcy or default during a business downturn, while a less-levered corporation might survive.

When taking the common size analysis into account, we can notice the total current liabilities and long-term debt and