Walmart Accounting Analysis - 2208 Words

Accounting Analysis The purpose of this section is to evaluate the degree to which Wal-Mart’s accounting captures its true business practices. Specifically, this section will examine places where Wal-Mart has accounting flexibility. Additionally, this section will evaluate the appropriateness of Wal-Mart’s accounting policies and estimating techniques. Together, these provide an indication of the credibility behind Wal-Mart’s numbers. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal†¦show more content†¦After much analysis of Wal-Mart’s annual report, it was found that the company uses a financial measure, free cash flow, which is considered a non-GAAP financial measure under the SEC’s rules. Free cash flow measures the ability to generate additional cash from business operations and therefore is believed to be an important financial measure to evaluate the business’ financial performance. As stated in the MDA section of Wal-Mart’s annual report, â€Å"Free cash flow should be considered in addition to, rather than as a substitute for, income from continuing operations as a measure of our performance and net cas h provided by operating activities as a measure of our liquidity.† There are several methods in calculating a company’s free cash flow; Wal-Mart views this measure as supplemental information to the firm’s entire statement of cash flows. I feel as though the choice to use the measure of free cash flow may seem deceiving and perhaps mislead readers of Wal-Mart’s annual report. Wal-Mart’s free cash flow does not represent the actual cash available because the measure does not deduct the payments for debt and other contractual obligations or payments made for business acquisitions Assess Accounting Flexibility Accounting Flexibility: high level Summary of Critical Accounting Policies Management strives to report the financial results of the company in a clear and understandable manner, although in some casesShow MoreRelatedAcc 205 Final Paper1538 Words   |  7 PagesWalmart Corporation (Financial Overview) William Jones ACC205: Principles of Accounting Instructor: Emmett Denham Date: 2/09/2015 While inaccurate accounting can cause misleading information about the company, every successful company should develop an income statement and balance sheet when monitoring financial growth. Also, formulating a horizontal and ratio analysis creates an accurate trend of the company spending behavior and debt-to-ratio venerability. 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