Analyzing Financial Performance- Insights from Walmart’s P&L Statement

Analyzing Financial Performance- Insights from Walmart’s P&L Statement

The net sales refer to the total sales that a company such as Walmart makes less the returns, discounts, and allowances. The gross profit is the total amount of revenue that a company makes without any deductions. In Walmart’s Profit & Loss Statement, the company achieved higher net sales than it had planned. The figure is also higher than the previous year’s net sales. The gross profit indicates a similar pattern in which the company performed better than the previous year and exceeded its goals.

Walmart’s operations manager would be more interested in the expenses and revenue sections. The revenue section shows the amount of money that the company generates through its main economic activities. The expenses section indicates the amount of money that the same company consumes when carrying out economic activities. The two sections inform the managers about the company’s profitability. The managers are then aware of elements in the two sections they should moderate to increase profits and reduce expenses.

Walmart’s expenses show a general increment from the previous year. This means that the company is consuming more of the increased profits. The most significant increment is in the occupancy cost. This implies that the company hired more space or is paying more rent for its current space. The labour cost also increased from the previous year. Walmart should consider reducing the number of its employees. This will reduce the cost of labour significantly. At the same time, the store should ensure that the remaining staff is not overwhelmed so they can remain motivated to perform their roles efficiently. In the future, the store should consider buying the space to eliminate occupancy costs.

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Use the P&L statement to help you answer the following questions:
Explain the difference between the numbers representing Net Sales and Gross Profit in the example statement.

Identify two sections of the example income statement that would be of particular interest to operations managers at Walmart and explain why.
Based on the example statement, present and support one recommendation for your operations manager to improve financial performance in your Walmart store.