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Perform financial statement analysis on Amazon.com versus Walmart, using ratios and Excel spreadsheet for the most recent published year end date (Fiscal 2022). Prepare a one-page persuasive memo explaining the comparison and attach an Excel image showing your ratio calculations for Amazon. Combined, I believe you can submit both on a single two-page document. Ensure your Excel file is clearly labeled and easily readable and your essay is cogent.
First paragraph:
Introduce your companies (walmart and amazon)
Introduce your method (using ratio analysis and business valuation)
Preview your message
Body of your paper:
Deliver your message … for this assignment use two paragraphs… one for ratio analysis (profitability, productivity and financial leverage) and the other for your two methods of business valuation.
Conclusion:
Summarize your findings and give your advice based on your findings.

Here’s the actual guide for your financial statement analysis memo assignment comparing Amazon and Walmart, using ratios and business valuation methods.

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Guide for Financial Statement Analysis Memo:

Introduction:

• Companies Overview:
  • Briefly introduce Amazon and Walmart as the two companies being compared. Discuss their industries, market position, and general financial landscape.
  • Example: “Amazon and Walmart are two of the largest retailers globally, with Amazon dominating e-commerce and cloud computing and Walmart maintaining its stronghold in physical retail and expanding its online presence.”
• Methods:
  • Explain that you will use ratio analysis and business valuation techniques to compare the financial performance and market value of both companies.
  • Ratio Analysis: This will help evaluate the companies’ profitability, productivity, and financial leverage.
  • Business Valuation: This will include two methods: Price-to-Earnings (P/E) ratio and Discounted Cash Flow (DCF) valuation.
• Preview the Message:
  • Provide a brief preview of your analysis and what conclusions will be drawn based on your findings.
  • Example: “This memo will highlight key financial ratios, assess the companies’ market value through P/E and DCF valuation, and conclude with recommendations on investment potential.”

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Body of Your Memo:

1. Ratio Analysis (Profitability, Productivity, and Financial Leverage):

• Profitability Ratios: These ratios measure the companies’ ability to generate earnings relative to sales, assets, or equity. You may include:
  • Gross Profit Margin (Gross Profit/Sales)
  • Operating Profit Margin (Operating Income/Sales)
  • Net Profit Margin (Net Income/Sales)
• Productivity Ratios: These ratios assess how efficiently a company uses its assets. Possible ratios include:
  • Asset Turnover (Sales/Total Assets)
  • Inventory Turnover (COGS/Average Inventory)
• Financial Leverage Ratios: These ratios measure the companies’ use of debt in financing their operations.
  • Debt-to-Equity Ratio (Total Debt/Total Equity)
  • Equity Multiplier (Total Assets/Total Equity)
• Comparison: Provide a direct comparison between Amazon and Walmart, highlighting any significant differences in these ratios.

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2. Business Valuation Methods:

• P/E Ratio (Price-to-Earnings Ratio): This ratio compares a company’s current share price to its earnings per share (EPS). It helps assess the relative value of the company.
  • P/E = Market Price per Share / Earnings per Share
  • Example: “Amazon’s P/E ratio is X, indicating that investors are willing to pay X times the earnings for Amazon’s stock. In contrast, Walmart’s P/E ratio is Y, suggesting a lower or higher market valuation.”
• Discounted Cash Flow (DCF) Valuation: This method estimates the value of a company based on its projected future cash flows, discounted back to present value using a discount rate.
  • Include steps such as:
    1. Estimating future free cash flows.
    2. Applying an appropriate discount rate.
    3. Calculating the present value of those cash flows.
    • This method will provide a deeper understanding of the intrinsic value of the companies.

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Conclusion:

• Summary of Findings:
  • Summarize the key insights from both ratio analysis and business valuation.
  • Example: “Amazon shows a higher profitability ratio compared to Walmart but has a higher debt load. In contrast, Walmart maintains stable financial leverage with consistent productivity.”
• Investment Advice:
  • Based on your analysis, provide recommendations on which company might be a better investment.
  • Example: “Given Amazon’s high growth potential and strong profitability ratios, it might appeal to growth investors, while Walmart’s stability and lower P/E ratio make it a more conservative investment.”

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Excel Image:
Make sure to include a clear, labeled image of your Excel calculations for the ratios for Amazon.

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Would you like further assistance with building your Excel spreadsheet or additional help with specific sections of the memo?

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