For the Discussion Board, we will be applying ratio analysis concepts to compare Amazon and Walmart. Use the financial data and the ratios that have been calculated for Amazon and Walmart that are found in this workbook:
Group A: Evaluate the similarities and differences found in the liquidity ratios and the asset management of these two firms.
In your original post, explain what the ratio results are telling us. Simply saying one firm’s ratio is higher the other firm’s ratio tells me nothing that I can’t see with my own two eyes. For example, if a firm’s current ratio (current assets / current liabilities) is increasing over time, that can be the result of assets going up while liabilities are fixed, but can also be caused by assets remaining constant while liabilities decrease. You may comment on trends over time for either or both companies, or simply compare the level of one firm’s ratios against the other.
Ratio analysis is like most other art forms — most people need to practice on it to get any good at it. There is a lot of information in the 10K that can often explain why the numbers look like they do. The MD&A discuss the results and often give insights as to why one number might be larger for this firm than for its peers.
If you disagree or have an alternative interpretation, that is good — professional analysts often discuss ratio results in a “is the glass half full or half empty?” manner, and professionals frequently look at the exact same set of numbers and come to different conclusions. That is what makes it interesting, because interpretation of financial results is more of an art form than an exact science.
As you comment, though, please keep it civil. We WANT to see alternative interpretations, discussion, and disagreement — but we also want to make sure that we encourage each other to feel comfortable with sharing their thoughts. So even if a fellow student’s posting is the dumbest thing you have ever seen (and that would be hard to believe, given how much dumb there is in the world), keep it civil. For example, “I might have interpreted that ratio to mean things were getting worse rather than better. Here is how I saw it…” is a much better approach than “U R Sew Dum !”.
The goal of this Discussion Board is to give you some practice in interpreting ratio results. The professor(s) will also be glad to join in, so feel free to ask questions as well as to post opinions. The DB is supposed to simulate inclass discussion, so let’s get in there and discuss!
