Index

Section Pages
Table 1 Income Statement 1
Table 2 - Balance Sheet 2
Table 3 Cash Flow Statement 3
Table 4 Common-size Income Statement 4
Table 5 Common-size Balance Sheet 5
Table 6 Financial Ratios 6
Table 7 the! "e# Ratios 7
Biblio$!a%h#
Ratio Analysis
Liquidity Ratios
&i'(i)it# !atios meas(!e a *i!m+s abilit# to meet its *inancial
obli$ations, The o-e!all health o* a *i!m has t!a)itionall# been meas(!e) b#
these !atios, The (se*(lness o* li'(i)it# !atios is now chan$in$ as mo!e
com%anies a!e hol)in$ *ewe! c(!!ent assets to $ene!ate !e-en(e, These
!atios a!e still a $oo) meas(!e *o! this in)(st!# beca(se the )isco(nt !etail
in)(st!# )oes !el# on a la!$e amo(nt o* c(!!ent assets to $ene!ate !e-en(e,
The meanin$ o* hi$h an) low !atios a!e .()$e) base) on the !ele-ant
in)(st!# no!ms,
Current Ratio
Current Ratio = Total C(!!ent /ssets
Total C(!!ent &iabilities
2
Items in this table !e%!esent %e!centa$es o* total assets,
Account 1996 1997 1998 RMA
Cash 0 1'(i-alents 2,223 3,673 5,413 14,33
5e!chan)ise In-ento!ies 45,11 46,66 46,14 36
the! C(!!ent /ssets 6,61 4,51 4,12 ,2
Total Current Assets 54.9% 55.14% 55.27% 53.60%
C(!!ent 5at(!ities o* &on$-te!m
)ebt
1,463 ,523 ,543 23
T!a)e /cco(nts 7a#able 14,46 14,12 14,45 17,3
/cc!(e) 7a#!oll 0 the!
&iabilities
6,46 7,25 6,56 7,6
Ta8es othe! than income ta8es ,67 1,54 1,47 9:/
Total Current Liabilities 25.21% 24.15% 26.06% 33.8%
Current Ratio 2.15 2.28 2.12 1.6
The c(!!ent !atio is a meas(!e o* total c(!!ent assets to total c(!!ent
liabilities, This in)icates a *i!m+s abilit# to meet its c(!!ent obli$ations with
cash; in-ento!ies o! othe! li'(i) c(!!ent assets, / hi$h !atio (s(all# in)icates
that a *i!m is bette! able to meet liabilit# obli$ations,
enc!"ar#$
"ma!t+s c(!!ent !atio is 273 abo-e the in)(st!# no!m, It a%%ea!s that
"ma!t is in a bette! %osition to meet its obli$ations than the in)(st!#, The
com%an#+s common size) statements !elati-e to the in)(st!# can e8%lain this
!elation to the in)(st!#, C(!!ent assets a!e 33 $!eate! than the in)(st!#<
3
while the c(!!ent liabilities a!e 233 lowe! than the in)(st!#, Th(s; the
c(!!ent !atio is $!eate! than the in)(st!#,
/ close! loo= into the elements o* the !atio in)icates a hea-# !eliance
on in-ento!#; which is 223 abo-e the in)(st!# no!m, The com%an# also has
in com%a!ison to the in)(st!# low cash balances >643 less?, "ma!t+s
c(!!ent assets a!e 33 $!eate! than the in)(st!#, The most si$ni*icant *eat(!e
o* c(!!ent liabilities is t!a)e acco(nts %a#able at 163 less than the in)(st!#,
In a))ition; c(!!ent mat(!ities o* lon$ te!m )ebt o* acc!(e) %a#!oll a!e less
then the in)(st!# in !elati-e common-size *i$(!es, Th(s; the c(!!ent
liabilities o* "ma!t a!e 233 lowe! than the in)(st!#, /ltho($h "ma!t is
ca!!#in$ si$ni*icantl# less c(!!ent liabilities it is also ca!!# m(ch less cash
an) m(ch mo!e in-ento!# than the in)(st!#,
@owe-e!; "ma!t+s cash mana$ement a%%ea!s to be a)e'(ate e-en with
the state) lowe! cash balances, In !e-iewin$ the cash *low statement; net
cash a*te! o%e!ations was a %ositi-e A2;4115 *o! *iscal #ea! en) 1662,
"ma!t ha) a)e'(ate cash *low co-e!a$e to %a# thei! c(!!ent mat(!ities o*
lon$ te!m )ebt; inte!est e8%ense an) income ta8 e8%ense, "ma!t+s net
ca%ital e8%en)it(!es o* A1;1135 we!e also co-e!e) b# cash *low, "ma!t+s
!emainin$ cash balance was A7145 *o! the #ea! 1662, @owe-e!; it is
im%o!tant to note that net cash *low o%e!ations ha) been on a 523 )ecline
4
*o! the th!ee #ea! %e!io) 1666-1662, In a))ition; "ma!t has a !e-ol-in$
c!e)it a$!eement o* A2,5 billion that %!o-i)es "ma!t the contin(e) *le8ibilit#
in thei! cash mana$ement %!actices,
Ta=in$ into consi)e!ation both common size an) cash *low statements
it a%%ea!s that in-ento!# mana$ement ma# be the %!ima!# %!oblem, /s seen
late! in the in-ento!# !atios; "ma!t hol)s abo-e the a-e!a$e no!m o*
in-ento!# !es(ltin$ in thei! hi$he! costs o* $oo)s sol), In o!)e! to bette!
e-al(ate "ma!t+s li'(i)it#; the '(ic= !atio will be !e-iewe) below,
%rend$
The c(!!ent !atio o-e! the last th!ee #ea!s has !emaine) stable )(e to
the stabilit# o* the c(!!ent assets an) c(!!ent liabilities as a %e!centa$e o*
total assets, C(!!ent assets $!ew 13 while c(!!ent liabilities $!ew 23 o-e!
the enti!e %e!io) an) th(s; the 1662 !atio is somewhat less than the 1666
!atio,
&uic# Ratio
&uic# Ratio = Cash an) 1'(i-alents - In-ento!#
Total C(!!ent &iabilities
Account 1996 1997 1998 RMA
Cash 0 1'(i-alents 2,223 3,673 5,413 14,433
5
T!a)e /cco(nts !ecei-able 4 4 4 2,5
the! C(!!ent /ssets 6,61 4,51 4,12 ,2
Total Current Assets less
inventory
9.72% 8.18% 9.13% 17.6%
C(!!ent 5at(!ities o* &on$-te!m
)ebt
1,463 ,523 ,543 2,43
T!a)e /cco(nts 7a#able 14,46 14,12 14,45 17,3
/cc!(e) 7a#!oll 0 the!
&iabilities
6,46 7,25 6,56 7,6
Ta8es othe! than income ta8es ,67 1,54 1,47 9:/
Total Current Liabilities 25.21% 24.15% 26.06% 33.8%
ui!" Ratio .38 .34 .35 .4
The '(ic= !atio is consi)e!e) a mo!e acc(!ate meas(!e o* a *i!m+s
abilit# to meet its c(!!ent liabilities, In calc(latin$ this !atio; in-ento!# is
s(bt!acte) *!om the total c(!!ent assets beca(se it is the most commonl#
in*late) an) least li'(i) c(!!ent asset,
enc!"ar#$
"ma!t+s '(ic= !atio o* ,35 !elati-e to the in)(st!# !atio o* ,4 in)icates
that the com%an# is !eliant on in-ento!# to meet its obli$ations, "ma!t+s
c(!!ent assets min(s in-ento!# is 6,133 o* total assets in com%a!ison to the
in)(st!ies 17,63, This !eliance (%on in-ento!# to meet c(!!ent obli$ation is
(s(all# a ba) sit(ation, "ma!t+s lowe! '(ic= !atio com%a!e) to the in)(st!#
can be *(!the! e8%laine) b# the *act that "ma!t+s in-ento!# !e%!esents 233
6
o* its c(!!ent assets; which is si$ni*icantl# hi$he! than the in)(st!# a-e!a$e
o* 673,
The c(!!ent liabilities a!e lowe! than the in)(st!# an) ha-e been
)isc(sse) %!e-io(sl# in the c(!!ent !atio, Bhile; the c(!!ent liabilities is
onl# 233 less than the in)(st!#; the c(!!ent assets min(s in-ento!# is 423 is
less than the in)(st!#, Conse'(entl#; the '(ic= !atio is less than the in)(st!#
b# 12,53,
%rend$
The '(ic= !atio o-e! the last th!ee #ea!s o-e!all has !emaine) stable
)(e to the stabilit# o* the c(!!ent assets an) c(!!ent liabilities as a %e!centa$e
o* total assets, @owe-e!; with a 63 )!o% in c(!!ent assets min(s in-ento!#
an) a 23 inc!ease in c(!!ent liabilities; the !atio has sli$htl# )ecline) o-e!
the th!ee #ea! %e!io), In a))ition to li'(i)it# !atios; asset mana$ement !atios
will hi$hli$ht the com%an#+s st!en$ths an) wea=nesses,
Manage"ent Ratios
Sales Recei'a(le Ratio
Sales ) Recei'a(le = 9et Sales
7
T!a)e Recei-ables
This !atio meas(!es the n(mbe! o* times !ecei-ables t(!n o-e! in a
#ea! !elati-e to sales, This )ete!mines the time between a sale an) act(al
collection, The c!e)it te!ms an) '(alit# o* !ecei-ables can be meas(!e)
(sin$ this !atio !elati-e to the in)(st!#, /nothe! wa# to -iew this !atio is in
the n(mbe! o* )a#s the !ecei-able !emains on the com%an#+s boo=s, This
!atio will be )isc(sse) with the Ca#s in /cco(nts Recei-able !atio below,
*ays Recei'a(le Ratio
*ays Recei'a(les D 365
Sales: Recei-ables Ratio
Ca#+s Recei-ables !atio tells how man# )a#s on a-e!a$e it ta=es to
collect on sales, I* this n(mbe! is hi$h; it in)icates that the!e a!e some
acco(nts that a!e a$in$ an) ma# ne-e! be collecte), It ma# also in)icate
loose c!e)it %olicies an) %oo! collection %!ocesses, In some e8t!eme cases;
it can !e-eal %oo! inte!nal cont!ols an) %!ocesses in acco(ntin$ s(ch as cash
collection an) !econcilement o* acco(nts, "ma!t )oes not ca!!# an# acco(nt
2
!ecei-able )(e to the sale o* thei! c!e)it ca!) to Bene*icial 9ational Ban=
ES/, /cco!)in$ to the te!ms o* the sale; Bene*icial !etains all c!e)it !is= *o!
c!e)it ca!) !ecei-ables, Beca(se o* "ma!t+s ze!o t!a)e !ecei-ables these
!atios a!e not !ele-ant to o(! anal#sis othe! than to note that "ma!t is
at#%ical o* thei! %ee!s,
In'entory +ro,t!
Account 1996 1997 1998 RMA
In-ento!# %e!cent to total
assets
44,423 46,663 46,143 36,443
In-ento!# A6;354
5
A6;367
5
A6;536
5
9:/
#nventory $ro%t& '(A .20% 2.65% '(A
In-ento!# has !emaine) !elati-el# stable *o! the %ast th!ee #ea!s,
@owe-e!; in com%a!ison to the in)(st!# as seen in the abo-e table; the# a!e
hol)in$ e8cessi-e in-ento!#, In-ento!# )a#s on han) >in-ento!# t(!no-e!?
is a%%!o8imatel# 34 )a#s >4,468? $!eate! than >less than? the in)(st!#
a-e!a$e o* 61 )a#s >5,4? as seen below,
6
Cost o- Sale In'entory Ratio
Cost o- sales ) In'entory = Cost o* sales
In-ento!#
Account 1996 1997 1998 RMA
Cost o* $oo)s sol) 77,523 72,153 72,163 67,643
In-ento!# 44,423 46,663 46,143 36,443
Cost o) *ales(#nventory
Ratio
3.84 3.95 4.06 5.0
This !atio meas(!es the n(mbe! o* times in-ento!# is t(!ne) o-e!
)(!in$ the #ea! in te!ms o* )olla!s, @i$h an) low t(!no-e! !elati-e to the
in)(st!# co(l) mean eithe! %oo! in-ento!# mana$ement >hi$h t(!no-e!? o!
%oo! (tilization o* !elate) !eso(!ces >low t(!no-e!?,
*ays In'entory Ratio .I/0*123
14
*ays In'entory D 365
Cost o* Sales:In-ento!#
Account 1996 1997 1998 RMA
T(!no-e! Ratio 3,24 3,65 4,43 6,4
.I/0*123 95.09 92.40 90.64 73
In-ento!# )a#s on han) meas(!es how lon$ the com%an# hol)s
in-ento!# be*o!e it is sol), "ma!t+s 64,64 )a#s is >12 )a#s lon$e! than the
in)(st!#? shows a -e!# se!io(s %!oblem that !i%%les th!o($h the enti!e
com%an#+ *inancial statements an) o%e!ations, This !atio s(%%o!ts %!e-io(s
e-i)ence that the com%an# is e8%e!iencin$ in-ento!# cont!ol an)
mana$ement %!oblems,
enc!"ar#$
The cost o* sales is 153 hi$he! than the in)(st!# a-e!a$e< a si$ni*icant
)i**e!ence that co(l) be att!ib(te) to a %oo! )ist!ib(tion s#stem; %oo! sales
mana$ement an) ine**ecti-e %(!chasin$ %!actices, In-ento!# is 223 abo-e
the in)(st!# a-e!a$e in)icatin$ "ma!t ma# be e8%e!iencin$ in-ento!#
mana$ement %!oblems, Since in-ento!# e8cee)s the in)(st!# b# a $!eate!
ma$nit()e than cost o* sales e8cee)s the in)(st!#; the cost o* sales:in-ento!#
!atio is less than the in)(st!# an) as a !es(lt in-ento!# )a#s on han) is
$!eate! than the in)(st!# a-e!a$e,
%rend$
11
In-ento!# )a#s on han) has been )eclinin$ )(e to a 7,63 $!owth in
cost o* sales -e!s(s a 2,63 $!owth in in-ento!# o-e! the 1666-1662 %e!io),
Cost o- Sales Paya(les Ratio
Cost o- Sales ) Paya(les = Cost o* sales
T!a)e 7a#ables
Account 1996 1997 1998 RMA
Cost o* Sales 77.58
%
78.15
%
78.16
%
67.60
%
/cco(nts 7a#ables T!a)e 14.06
%
14.18
%
14.45
%
17.30
%
Cost o) *ales +ayable Turnover
Ratio
12.14 13.08 12.86 10.9

This meas(!ement o* li'(i)it# meas(!es the n(mbe! o* times acco(nt
%a#ables t(!no-e! in one #ea! an) can %!o-i)e n(me!o(s insi$hts into the
o%e!ations o* a com%an# incl()in$ how well the# a!e wo!=in$ with -en)o!s
in its s(%%l# chain, / )ownwa!) t!en) o! a low !atio com%a!e) to in)(st!#
stan)a!) ma# be in)icati-e o* cash *low %!oblems o! t(!moil between the
co!%o!ation an) its s(%%lie!s,
12
*ays Paya(le Ratio .AP*123
AP*12 D 365
Cost o* Sales:7a#ables
Account 1996 1997 1998 RMA
Cost o* Sales 77.58
%
78.15
%
78.16
%
67.60%
7a#able T(!no-e!
Ratio
12.14 13.08 12.86 18.6
A+,-. 30.06 27.91 28.39 33.0
The cost o* sales:%a#able !atio is (tilize) to )e!i-e the n(mbe! o* )a#s
%a#able which %!o-i)es a meas(!ement o* the len$th o* time between the
%(!chase on acco(nt an) the time the acco(nt is settle), It is not (ncommon
*o! com%anies to ta=e libe!ties with the %a#ment o* acco(nts; st!etchin$ the
c!e)it te!ms o! !i)in$ thei! t!a)e,
enc!"ar#$
Cost o* sales is t!en)in$ (%wa!)s to 72,163 in 1662 which is 163
abo-e in)(st!# a-e!a$e, /s seen in the acco(nts %a#able common size
%e!centa$es; "ma!t is hol)in$ a%%!o8imatel# 16,53 lowe! on a-e!a$e than
13
the in)(st!# stan)a!), Since the cost o* sales is $!eate! than in)(st!# a-e!a$e
an) acco(nts %a#ables a!e less than the in)(st!# a-e!a$e< cost o*
sales:%a#able !atio *o! "ma!t is $!eate! than the in)(st!# an) acco(nts
%a#able )a#s on han) is less than the in)(st!#,
%rend$
Cost o* sales has $!own 7,63 o-e! 1666-1662 while acco(nts %a#able
inc!ease) 1,63 o-e! the same %e!io), /s a !es(lt; the t(!no-e! $ot la!$e! an)
the )a#s $ot smalle! o-e! the th!ee #ea! %e!io), 7e! notes to the 1662
*inancial statements; "ma!t !e%o!te) hi$he! %!omotional an) occ(%anc# cost
as a cont!ib(tin$ *acto! *o! the inc!ease in cost o* sales, Beca(se "ma!t is
%a#in$ thei! t!a)e %a#ables 4,61 )a#s '(ic=e! than the in)(st!# "ma!t is
(sin$ a%%!o8imatel# A316 mo!e cash than the# wo(l) i* the# we!e mo!e in-
line with the in)(st!# a-e!a$e o* 33 )a#s,
"ma!t+s acco(nts %a#able )a#s on han) a!e less than the in)(st!#
a-e!a$e, The# a!e %a#in$ an a-e!a$e o* 143 *aste!; with an a-e!a$e o* 26
)a#s !elati-e to the in)(st!ies 33 )a#s,
14erating Cycle
14
/cco(nts Recei-able Ca#s on @an) >/RC@? F In-ento!# Ca#s on @an)
>I9GC@?
Cas! Con'ersion Cycle
/cco(nts Recei-able Ca#s on @an) >/RC@? F In-ento!# Ca#s on @an)
>I9GC@? /cco(nts 7a#able Ca#s on @an) >/7C@?
5le"ents 1996 1997 1998 RMA
/RC@ 4 4 4 2
I9GC@ 65,46 62,44 64,64 73
/7C@ 34,46 27,61 22,36 33
-/eratin0 Cy!le 95.09 92.40 90.64 75
Cas& Conversion
Cy!le
65.02 64.49 62.25 42
14erating Cycle
The o%e!atin$ c#cle is the time to ac'(i!e o! to man(*act(!e in-ento!#;
sell the %!o)(ct an) collect the cash, The o%e!atin$ c#cle is (s(all# less than
one #ea! *o! most in)(st!ies, /s seen in the "ma!t+s o%e!atin$ c#cle o*
15
64,64 )a#s an) the in)(st!# stan)a!) o* 75 )a#s; the )isco(nt !etail in)(st!#
is an e8am%le o* a sho!te! o%e!atin$ c#cle,
enc!"ar#$
"ma!t+s o%e!atin$ c#cle is 24,253 lon$e! than the R5/ in)(st!#
a-e!a$e, The o%e!atin$ c#cle *o! 1662 is 64,64 )a#s in com%a!ison to the
in)(st!# o* 75 )a#s,
%rend$
In-ento!# )a#s on han) has been )eclinin$ )(e to a 7,63 $!owth in
cost o* sales -e!s(s a 2,63 $!owth in in-ento!# o-e! the 1666-1662 %e!io)
which has ca(se) the o%e!atin$ c#cle )a#s to im%!o-e the 4,623 as in)icate)
abo-e, /s %!e-io(sl# state) "ma!t )oes not !etain c!e)it !is= on thei! c!e)it
ca!) !ecei-ables the!e*o!e /RC@ is ze!o,
Cas! con'ersion cycle$
The amo(nt o* time e8%!esse) in n(mbe! o* )a#s !e'(i!e) to sell in-ento!#
an) collect acco(nts !ecei-able less the n(mbe! o* )a#s c!e)it is e8ten)e) b#
s(%%lie!s,
enc!"ar#$
The cash con-e!sion c#cle is 42,213 lon$e! than the R5/ in)(st!#
a-e!a$e, The cash con-e!sion c#cle *o! 1662 is 62,45 )a#s in com%a!ison to
the in)(st!# o* 42 )a#s,
16
%rend$
Bith I9GC@ )eclinin$ at 53 an) /7C@ also )eclinin$ at 63 *o!
the %e!io); the cash con-e!sion c#cle has )ec!ease), The o%e!atin$ c#cle is;
as state) abo-e is also lon$e! than the in)(st!# ha-in$ a 24,253 im%act on
the cash con-e!sion c#cle, "ma!t+s acco(nts %a#able )a#s on han) a!e less
than the in)(st!# a-e!a$e, The# %a#in$ an a-e!a$e o* 143 *aste! to %a#;
with an a-e!a$e o* 26 )a#s !elati-e to the in)(st!ies 33 )a#s, "ma!tHs cash
con-e!sion c#cle has im%!o-e) b# 4,453 o-e! the th!ee #ea! %e!io) 1666-
1662; howe-e! still !emainin$ 24,45 )a#s lon$e! than the in)(st!#,
Sales ) /et 6or#ing Ca4ital Ratio
Sales ) 6or#ing Ca4ital = 9et sales
9et wo!=in$ ca%ital
Account 1996 1997 1998 RMA
9et Sales A31;437
5
A32;163
5
A33;674
5
See note
Total C(!!ent /ssets 54,133 55,143 55,273 53,643
Total C(!!ent &iabilities 25,213 24,153 26,463 33,243
9et Bo!=in$ Ca%ital 22,623 34,663 26,213 16,243
*ales('et 1or"in0 Ca/ital 7.61 7.66 8.14 12.7
17
Ratio
9oteI R5/ sales )ata was not in%(t beca(se it was not com%a!able to
"ma!t which is one o* the to% th!ee !etaile!s ma=in$ (% 243 o* the )isco(nt
!etail ma!=et sha!e,
This !atio %!o-i)es a meas(!ement o* how well wo!=in$ ca%ital; the
)i**e!ence between c(!!ent assets an) c(!!ent liabilities; is bein$ (tilize)
within the o!$anization, In essence this !atio tells (s *o! e-e!# )olla! o* new
wo!=in$ ca%ital in-este) in 1662 A2,12 o* sales we!e $ene!ates !e-en(es
com%a!e) to the in)(st!# A12,44 in sales, The lon$- te!m s(!-i-al o* an
o!$anization is %a!tiall# )e%en)ent on how well it mana$es c(!!ent
o%e!ations, The *i!m m(st st!ate$icall# %lan *o! a ta!$ete) !an$e o* c(!!ent
assets an) %lan *o! thei! *inancin$,
enc!"ar#$
The sales:net wo!=in$ ca%ital !atio has t!ac=e) below the in)(st!#
a-e!a$e *o! the %ast th!ee #ea!s, The !atio has inc!ease) *!om 7,618 in 1666
to 2,148 in 1662 in com%a!ison to 12,78 to the in)(st!#, Sales:net wo!=in$
ca%ital !atio is 35,613 lowe! than the in)(st!#,
C(!!ent assets a!e sli$htl# hi$he! than the in)(st!# while c(!!ent
liabilities we!e 263 lowe! than the in)(st!# stan)a!), /s a !es(lt; "ma!t+s
sales to net wo!=in$ ca%ital !atio is less than the in)(st!#, This )is%a!it# in
12
c(!!ent assets an) c(!!ent liabilities !elati-e to the in)(st!# co(l) in)icate
that *inancin$ o* c(!!ent assets ma# be ta=in$ %lace with lon$- te!m
liabilities, /s a !es(lt o* "ma!t+s net wo!=in$ ca%ital is 423 $!eate! than
the in)(st!#, This la!$e net wo!=in$ ca%ital is )!i-in$ the !atio )own !elati-e
to the R5/ in)(st!# a-e!a$e,
The wo!=in$ ca%ital o* the )isco(nt sto!e in)(st!# can *l(ct(ate )(e to
seasonal le-els net o* t!a)e acco(nts %a#able; %!o*itabilit#; an) the le-el o*
sto!e o%enin$s an) closin$s, "ma!t en)e) 1662 with an inc!ease in its
n(mbe! o* sto!es *o! the *i!st time in *i-e #ea!s, "ma!t+s %!ima!# so(!ces o*
wo!=in$ ca%ital a!e cash *lows *!om o%e!ations an) bo!!owin$s (n)e! its
c!e)it *acilities,
%rend$
Sales inc!ease) b# 73; while net wo!=in$ ca%ital onl# inc!ease)
b#,23 *o! the 1666-1662 %e!io); !es(ltin$ in an inc!ease in the sales:net
wo!=in$ ca%ital !atio,
16
Sales ) /et 7ixed Assets
Account 1996 1997 1998 RMA
9et Sales A31;4375 A32;1235 A33;6745 See
note
9et Fi8e) /ssets 34,43:
A5;7445
44,23:
A5;4725
44,43:
A5;6145
37,5
3
'et *ales('et
2i3e4 Assets
Ratio
5.48 5.88 5.69 8.5
9oteI R5/ sales )ata was not in%(t beca(se it was not com%a!able to
"ma!t which is one o* the to% th!ee !etaile!s ma=in$ (% 243 o* the )isco(nt
!etail ma!=et sha!e,
This !atio shows the e**ecti-eness o* the (se o* *i8e) assets in a
b(siness to %!o)(ce sales, The!e is not a se!io(s )isto!tion in the #ea!l#
!atios *!om #ea! to #ea!; which !e%!esents *i8e) assets not bein$ la!$el#
)e%!eciate) o! *i8e) assets a!e bein$ !e%lace):a))e) at the same !ate as
)e%!eciation, S(!%!isin$l#; the intense (se o* labo! in this *o!m o* b(siness
24
has not a**ecte) o! )isto!te) the !atios *!om #ea! to #ea!, Bhen com%a!e) to
the in)(st!# the !atio is consi)e!abl# low, This ma# be the !es(lt o* an o-e!
in-estment o* its *i8e) assets o! a la!$e amo(nt o* leasehol) im%!o-ements,
Since leasehol) im%!o-ements can onl# be )e%!eciate) on a st!ai$ht-line
basis an) not at an accele!ate) basis, I* "ma!t hel) a la!$e %e!centa$e o*
leasehol) im%!o-ements -e!s(s the %e!centa$e o* b(il)in$s; the net *i8e)
assets wo(l) be la!$e! than thei! %ee!s att!ib(tin$ to the )isc!e%anc# in the
!atio,
Ca!e m(st be ta=en when (sin$ this !atio to com%a!e othe! *i!ms,
In*lation ma# ha-e ca(se) the -al(es o* some o* the ol)e! assets to be
se!io(sl# (n)e!state), l)e! assets ma# ha-e also been )e%!eciate) b# a
$!eate! amo(nt, The !es(lt o* s(ch a com%a!ison is that an ol)e! *i!m who
ac'(i!e) its assets #ea!s a$o at lowe! %!ices ma# ha-e a hi$he! t(!no-e! !atio
o* *i8e) assets, In a))ition; *i!ms (sin$ an accele!ate) )e%!eciation -e!s(s a
st!ai$ht-line metho) wo(l) ha-e a hi$he! t(!no-e! !atio,
enc!"ar#$
9et *i8e) assets a!e 44,43 to total assets while the in)(st!# is onl#
37,53, Beca(se o* "ma!t+s !eliance on net *i8e) assets !elati-e to the
21
in)(st!#; the net sales:net *i8e) assets !atio is 33,463 lowe! than the
in)(st!#,
"ma!t leases 653 o* all thei! *acilities while the %ee!s in the in)(st!#
own the ma.o!it# o* thei! *acilities, It a%%ea!s that )(e to this owne!shi%
)i**e!ence; the %ee!s in the in)(st!# a!e able to )e%!eciate thei! *i8e) assets
on an accele!ate) )e%!eciation metho) -e!s(s the st!ai$ht-line amo!tization
on leasehol) im%!o-ements (se) b# "ma!t, /s a !es(lt; "ma!t+s net *i8e)
assets a!e hi$he! than the in)(st!# as %!e-io(sl# state) abo-e, Re*e! to
abo-e 9et Fi8e) /ssets:Tan$ible 9et Bo!th !atio *o! *(!the! )etails
!e$a!)in$ 9et *i8e) /ssets,
%rend$
Sales inc!ease) b# 73 while net *i8e) assets inc!ease) b# 3,63 o-e!
the th!ee #ea! %e!io), /s a !es(lt; sales:total net *i8e) assets has inc!ease)
o-e! the th!ee #ea! %e!io), Sales inc!ease) *aste! than "ma!t+s net *i8e)
assets is a$ain in)icati-e o* "ma!t+s leasin$ !athe! than ownin$ sto!es,
22
/et Sales ) %otal Assets
Account 1996 1997 1998 RMA
9et Sales $31,437
M
$32,183
M
$33,674
M
See
note
Total /ssets $14,286
M
$13,558
M
$14,166
M
See
Note
'et *ales(Total Assets
Ratio
2.20 2.37 2.38 2.6
9oteI R5/ sales an) assets )ata was not in%(t beca(se it was not
com%a!able to "ma!t which is one o* the to% th!ee !etaile!s ma=in$ (% 243
o* the )isco(nt !etail ma!=et sha!e,
/$ain; this !atio is a meas(!e o* mana$ementHs abilit# to (tilize its
assets; in this case all o* its assets, It a%%ea!s that "ma!t is onl# able to
$ene!ate A2,32 -e!s(s thei! in)(st!# %ee!s $ene!atin$ A2,64 in sales *o! e-e!#
A1 o* assets, Th(s; it a%%ea!s that "ma!t is somewhat less e**icient, This
!atio is sli$htl# lowe! than the in)(st!# a-e!a$e )(e to the hi$he! in-ento!#
an) low cash balances, /s state) abo-e an e**o!t sho(l) be ma)e howe-e! to
inc!ease sales -ol(me to im%!o-e the !atio, /nothe! o%tion *o! im%!o-ement
23
wo(l) be to im%!o-e its c(!!ent asset t(!no-e! b# im%!o-in$ in-ento!#
mana$ement; which will im%!o-e its total asset t(!no-e!; th(s im%!o-in$ the
net sales-total asset !atio,
enc!"ar#$
The net sales:total assets !atio is 2,463 less than the in)(st!# a-e!a$e,
%rendI
Sales inc!ease) b# 73 while net total assets )ec!ease) b# 13 o-e! the
th!ee #ea! %e!io), /s a !es(lt; sales:total net *i8e) assets has inc!ease) o-e!
the th!ee #ea! %e!io) b# 2,123, Bith the new Bi$-" *o!mat; sales ha-e
inc!ease) with the int!o)(ction o* new lines, In a))ition; total assets ha-e
)ec!ease) sli$htl# )(e to the othe! assets liste) on the *inancial statements,
The notes to the *inancial statements )i) not incl()e an e8%lanation as to
what is com%!ise) in the othe! asset acco(nts; both sho!t-te!m an) lon$-te!m,
Co'erage Ratios
Co-e!a$e !atios meas(!e the abilit# to se!-ice )ebt *!om o%e!ations,
5I% ) Interest
5I%)Interest = 1BITJJJJ
Inte!est
24
Account)Ite" 1996 1997 1998 RMA
1a!nin$s Be*o!e Inte!est an)
Ta8es
2.49% 2.43% 3.24% 5.5%
Inte!est 1.44% 1.13% .87% .5%
56#T(#nterest Ratio 1.73 2.15 3.72 12.2
This !atio shows how well a *i!m is able to meet inte!est %a#ments,
In 1662; "ma!t+s o%e!atin$ income wo(l) co-e! thei! inte!est cost 3,72 times
!elati-e to the in)(st!# no!m o* 12,2 times,
enc!"ar#$
The 1BIT:Inte!est !atio is 3,728 in com%a!ison to the in)(st!# a-e!a$e
o* 12,28, 1a!nin$s be*o!e inte!est an) ta8es has t!ac=e) below the R5/
a-e!a$e *o! the th!ee-#ea! %e!io), In 1662; "ma!t+s 1BIT was at 3,243
-e!s(s the in)(st!# a-e!a$e o* 5,53, In a))ition; inte!est has )ec!ease) b#
36,63 o-e! the %ast th!ee #ea!s, @owe-e!; inte!est e8%ense o* ,273 *o!
1662 !emains abo-e the in)(st!# stan)a!) o* ,53, Bith 1BIT si$ni*icantl#
below the in)(st!# no!m o* inte!est nea! the no!m; the co-e!a$e !atio is
si$ni*icantl# below the R5/ a-e!a$e o* 12,2,
%rend$
25
1BIT inc!ease) 343 while inte!est )ec!ease) 36,63 o-e! the 1666-
1662 %e!io), The!e*o!e; TI1 inc!ease) b# 1153, This is *(!the! -ali)ate) b#
total )ebt )!o%%in$ *!om 57,53 to 54,53 o* total assets,
%otal *e(t ) 5I%
Account 1996 1997 1998 Median
Peer
Co"4ariso
n
Total &iabilities 57,543 52,623 54,253 9:/
1BIT 2,463 2,433 3,243 9:/
%otal *e(t)5I% Ratio 189:9 991; 696 :9<
Total )ebt to ea!nin$ be*o!e inte!est an) ta8es in)icates the amo(nt o*
)ebt the com%an# has it !elates to the 1BIT >o%e!atin$ income?, Fo!
e8am%le; in 1666; "ma!t ha) A14,46 o* )ebt to e-e!# one )olla! o* 1BIT;
A6,15 an) A6,64 *o! 1667 an) 1662 !es%ecti-el#, In essence in 1662; it too=
A6,64 o* )ebt to $ene!ate A1 o* o%e!atin$ income, This !atio !emains hi$h in
com%a!ison to the me)ian %ee! com%a!ison,
"ma!t+s im%!o-ement b# contin(e) !e)(ction o* total liabilities was
)(e to the (se o* cash *!om o%e!ations to %a# )own thei! te!m )ebt; mo!t$a$e
26
notes an) me)i(m te!m notes, This !e)(ction o* liabilities was o**set b# the
iss(ance o* Comme!cial 5o!t$a$e 7ass Th!o($h Ce!ti*icates >C5BS?
mo!t$a$e loans; which a!e s(b.ect to inte!est an) %!inci%al %a#ments with a
mat(!it# )ate o* Feb!(a!# 2442, Total )ebt also incl()es a A2,5 billion
!e-ol-in$ c!e)it a$!eement< howe-e!; no o(tstan)in$s we!e !e%o!te) *o!
1666-1662, @owe-e!; the !e-ol-in$ c!e)it a$!eement allows "ma!t to ca!!#
m(ch lowe! cash balances than thei! %ee!s,
*e(t Ser'ice Co'erage Ratio
Account 1996 1997 1998
/et Inco"e =.189M3 =>98M =;68M
Ce%!eciation 654 664 671
/mo!tization 4 4 4
Inte!est 18%ense 453 363 263
Total Cas& Available )or ,ebt
*ervi!e
79138 719321
8
719532
8
C5&TC A156 A72 A77
Inte!est 18%ense 453 363 263
T-TAL ,56T *ervi!e 76098 74418 73708
Cas& A)ter ,ebt *ervi!e 73048 78808 719902
8
,ebt *ervi!e Covera0e Ratio 1.49 2.99 4.14
27
%raditional *e(t Ser'ice$ %e!atin$ Income F Ce%!ec ,F /mo!t ,F
Inte!est 18%ense C(!!ent 5at(!it# &on$ Te!m
Cebt F Inte!est 18%ense
T!a)itional )ebt se!-ice co-e!a$e is the meas(!ement o* a com%an#+s
abilit# to se!-ice its c(!!ent mat(!ities o* lon$-te!m )ebt an) inte!est owe)
on that )ebt, "ma!t )ebt se!-ice co-e!a$e o* 1,46;2,66 an) 4,14 *o! *iscal
#ea!s en)in$ 66-62 !es%ecti-el# has im%!o-e) *o! the last th!ee #ea!s, This
inc!ease in the !atio is att!ib(te) to the la!$e $!owth in net income o*
213,423 an) 142,433 co(%le) with the )ec!ease in total )ebt se!-ice o*
163,
"ma!t leases 2;451 o* thei! *acilities, The te!ms o* the leases a!e 25
#ea!s with m(lti%le *i-e #ea! !enewal o%tions the allows the com%an# to
e8ten) the li*e o* the lease (% to 54 #ea!s be#on) the initial te!m, The
*ollowin$ !atios ill(st!ates the com%anies abilit# to !e%a# thei! )ebt ta=in$
!ental e8%ense o! lease e8%ense into consi)e!ation !athe! than the t!a)itional
)ebt se!-ice co-e!a$e !atio abo-e,
5I%*AR ) Interest 5x4ense ? Rental 5x4ense
22
Account 1996 1997 1998
1BIT A7235 A7215 A1;4615
Ce%!eciation 654 664 671
/mo!tization 4 4 4
Rent:&ease 18%ense 442 472 524
56#T,AR 7198798 719919
8
7292868
Inte!est 18%ense 453 363 263
Rental:&ease 18%ense 442 472 524
T-TAL 78958 78418 78178
56#T,AR(:#nterest ;Rent
53/ense<
2.103 2.283 2.803
This !atio !e%!esents the amo(nt o* co-e!a$e the com%an# has in o!)e!
to %a# thei! inte!est e8%ense an) lease e8%ense, This !atio is a))in$ bac=
non-cash e8%ense o* )e%!eciation an) amo!tization besi)es the cash e8%ense
o* !ent to calc(late total 1BITC/R, The contin(in$ t!en) is a %ositi-e t!en)
)(e to inc!ease) 1BIT; 1BITC/R an) the )ec!ease) in total inte!est
e8%ense, The lowe! inte!est e8%ense is )(e to the %a#)own o* lon$ te!m
)ebt; is mo!e than o**settin$ the inc!easin$ lease e8%ense,
5I%R ) Interest 5x4ense ? Rental 5x4ense
26
Account 1996 1997 1998 Median
-or
Peers
9et Income A7235 A7215 A1;461
5
9:/
Rent:&ease 18%ense 442 472 524 9:/
56#TR 719225
8
719259
8
719615
8
9:/
Inte!est 18%ense 453 363 263 9:/
Rental:&ease 18%ense 442 472 524 9:/
T-TAL 78958 78418 78178 9:/
56#TR(#nterest ;Rent
53/ense
1.37 1.50 1.98 3.4
This !atio !e%!esents the amo(nt o* co-e!a$e the com%an# has in o!)e!
to %a# thei! inte!est e8%ense an) lease e8%ense, This !atio )oes not a)) bac=
non-cash e8%enses as seen abo-e, This !atio is also a stan)a!) in)(st!# !atio
*o! )isco(nt !etail sto!es, /ltho($h; "ma!t+s !atio is t!en)in$ towa!)s a
%ositi-e )i!ection; in com%a!ison to the me)ian *o! the %ee!s in the in)(st!#
that incl()e< Bal-ma!t; Ca#ton @()son; Costco; Sho%=o an) /mes; the# a!e
si$ni*icantl# lowe!, The me)ian %ee! 1BIT ma!$in is a%%!o8imatel# 3,63
-e!s(s "ma!t+s 3,243 ma!$in, The lowe! !atio in com%a!ison to thei! %ee!s
is att!ib(te) to the lowe! 1BIT ma!$in, The %ee! anal#sis o* the e8%ense
si)e o* the !atio was not a-ailable *o! com%a!ati-e %(!%oses *o! this anal#sis,
34
Le'erage Ratios
&e-e!a$e !atios meas(!e the e8tent o* the o!$anization+s *inancin$
with )ebt, It is a meas(!ement o* the ca%acit# an) abilit# to meet lon$-te!m
obli$ations, The le-e!a$e !atios com%a!e the *(n)s s(%%lie) b# b(siness
owne!s with *inancin$ s(%%lie) b# c!e)ito!s, This )ebt *inancin$ in-ol-es
!is= associate) with the %a#ment o* %!inci%al an) inte!est, @owe-e!; the
*i!m ma# ea!n mo!e on these in-estments than it %a#s in inte!est that !es(lts
in the !et(!n o* the owne!+s ca%ital bein$ *a-o!abl# le-e!a$e), Cebt
*inancin$ also has the a)-anta$e o* not )il(tin$ stoc=hol)e! owne!shi%,
7ixed ) 6ort!
7ixed ) 6ort! = 9et *i8e) assets
Tan$ible net wo!th
Account 1996 1997 1998 RMA
'et 2i3e4 Assets :8918@ :89<6@ :197;@ <79;8@
9et wo!th 42,543 47,323 46,153 42,43
&ess Intan$ible /ssets 4 4 4 4
Tangible Net Worth 42,543 47,323 46,153 423
2i3e4 Assets( T'1 0.95 0.85 0.85 0.80
31
This shows to what e8tent the com%an# has in-este) its ca%ital into
the *i8e) assets o* %lant an) e'(i%ment, / smalle! !atio shows a !elati-el#
small in-estment into these *i8e) assets; %!o-i)in$ mo!e li'(i)it# *o!
c!e)ito!s, / hi$he! n(mbe! wo(l) in)icate a $!eate! !is= to these c!e)ito!s,
"ma!t+s Fi8e):Bo!th !atio is onl# sli$htl# la!$e! than the in)(st!#
stan)a!) an) ma# be att!ib(te) to the n(mbe! o* sto!es in the chain
com%a!e) to the in)(st!#, 7e! notes to the *inancial statements "ma!t+s *i8e)
assets a!e com%!ise) o* 443 ca%ital leases an) leasehol) im%!o-ements; an)
423 is in-este) in *(!nit(!e an) *i8t(!es, The concent!ation o* *i8e) assets
in *(!nit(!e an) *i8t(!es is att!ib(te) to the in-estment in the Bi$ "ma!t
sto!es; which !e'(i!e a))itional !e*!i$e!ation e'(i%ment *o! the $!oce!#
section >The 7ant!#?, /s state) %!e-io(sl#; "ma!t leases 653 o* thei!
*acilities also att!ib(te) to the hi$he! *i8e) assets com%a!e) to the in)(st!#
beca(se the amo!tization metho) (se) *o! *inancial statement %(!%oses is
st!ai$ht-line metho) o-e! the estimate) (se*(l li*e o* the assets,
enc!"ar#$
9et *i8e) assets a!e 11,33 $!eate! than the R5/ an) tan$ible net
wo!th is 2,43 $!eate! than the R5/, Since net *i8e) assets e8cee) the
in)(st!# a-e!a$e the *i8e) assets:total net wo!th is $!eate! >,25? than the
in)(st!# a-e!a$e >,24?,
32
%rend$
The tan$ible net wo!th has shown an (%wa!) t!en) *o! the %ast *ew
#ea!s with an inc!ease o* 15,65 3 *!om 1666 to 1662, The net *i8e) assets
)(!in$ the same %e!io) has onl# inc!ease) b# 3,63, Since the total net
wo!th inc!ease) *aste! than net *i8e) assets o-e! the %e!io); this !atio has
)ecline),
*e(t ) 6ort!
*e(t ) 6ort! = Total &iabilities
Tan$ible 9et Bo!th
Account 1996 1997 1998 RMA
Total &iabilities 57,53 52,623 54,253 52,443
Tan$ible 9et Bo!th 42,53 47,323 46,153 42,43
Total ,ebt(T'1
Ratio
1.35 1.11 1.03 1.08
This !atio shows the ca%ital cont!ib(tion !elationshi% between
c!e)ito!s an) owne!s an) is sometimes !e*e!!e) to as the )e$!ee o*
a)-anta$e, / hi$hl# le-e!a$e) *i!m will not ha-e as m(ch *le8ibilit# to
33
bo!!ow in the *(t(!e as one with a hi$he! )ebt:wo!th !atio, / hi$he! !atio
in)icates that the co!%o!ation is (tilizin$ a la!$e amo(nt o* )ebt to *inance its
b(siness o%e!ations on a )ail# basis, It wo(l) a%%ea! that "ma!t is
ma!$inall# below thei! %ee!s in the (sa$e o* )ebt,
enc!"ar#$
Total liabilities a!e 2,23 lowe! than the R5/ in)(st!# a-e!a$e an)
tan$ible net wo!th is 2,43 hi$he! than the R5/ a-e!a$e, /s a !es(lt;
"ma!t+s )ebt:wo!th !atio o* 1,438 simila! to the 1,428 R5/ a-e!a$e,
%rend$
/s a !es(lt o* total liabilities )ec!easin$ b# 123 while net wo!th has
inc!ease) b# 163 o-e! this %e!io), "ma!t+s )ebt:wo!th !atio has im%!o-e)
b# 23,73 )(!in$ the th!ee #ea! %e!io) 1666-1662,
The com%an# has %ai) )own thei! lon$-te!m notes with cash; b(t also
iss(in$ con-e!tible %!e*e!!e) sec(!ities, These sec(!ities a!e con-e!tible to
3,33 sha!es o* "ma!t stoc=, "ma!t also has a A2,5 billion )olla! Re-ol-in$
C!e)it /$!eement that was amen)e) in 1667 with mat(!it# e8tensions an)
!e)(ce) inte!est !ate s%!ea)s, In 1662; the com%an# belie-e) that its c(!!ent
*inancin$ a!!an$ements wo(l) be s(**icient to meet thei! li'(i)it# nee)s *o!
o%e!ations an) ca%ital,
34
Pro-ita(ility Ratios
7!o*itabilit# !atios a!e a (se*(l tool in the e-al(ation o* mana$ement
%e!*o!mance,
/et Inco"e +ro,t! Rate
Account 1996 1997 1998
9et Income A>224?
5
A2465 A5125
'et #n!o=e $ro%t& Rate 61% 213.18
%
108.03
%
9et income $!owth !ate as seen in the table abo-e im%!o-e)
si$ni*icantl# *o! #ea!s 66; 67 an) 62, The loss in 1666 is att!ib(te) to a
)ec!ease o* ,63 in sales *!om the %!e-io(s #ea! which can be att!ib(te) to
the sale o* the 5e8ican an) Cana)ian inte!national o%e!ations, "ma!t also
close) 42 sto!es in 1666; which was o**set %a!tiall# b# the o%enin$ o* 21
new sto!es, In a))ition; FK1 1666 ha) one less wee= )(!in$ *iscal #ea!
1666 )ec!ease) sales, In a))ition "ma!t at FK1 1666 !e%o!te) a net loss o*
A451 *!om )iscontin(e) o%e!ations *!om the sales o* the B(il)e!s S'(a!e
s(bsi)ia!# an) also the sale o* a %o!tion o* an in-estment in Th!i*t# 7a#less
@ol)in$s,
35
9et income *o! 1667 inc!ease) at a !ate o* 213,123< %!ima!il# )(e to
the o%enin$ o* the Bi$ "ma!t sto!es; the int!o)(ction o* the 5a!tha Stewa!t
lines; Sesame St!eet =i)s line an) inc!ease) %!omotional acti-ities, The net
income inc!ease was )(e to not onl# the sales inc!ease b(t to e8%ense
cont!ol, @owe-e!; most o* the la!$e %e!centa$e inc!ease in net income was
)(e to an 233 )ec!ease in -ol(nta!# ea!l# !eti!ement %!o$!ams an) a 613
)ec!ease in inte!est e8%ense, Sales inc!ease) b# 2,373 *o! the FK167, In
a))ition; SL0/ e8%enses )ec!ease) b# ,263 )(e to the sale o* the
inte!national o%e!ations an) mana$ement cont!ol o* e8%enses b# *oc(sin$ on
the co!e b(siness lines,
9et income *o! 1662 inc!ease) a secon) #ea! in a !ow with the $!owth
o* 142,433 o-e! 1667, This inc!ease in att!ib(te) to a 4,633 $!owth in
sales *o! FK162 *!om the new Bi$ "ma!t sto!e conce%t; the 5a!tha Stewa!t
lines; Sesame St!eet =i)s line an) %!i-ate label "ath# I!elan) line, In
a))ition; SL0/ e8%enses )ec!ease) b# ,523 *o! the #ea!; a$ain *o! the
!easons state) in the %!ece)in$ %a!a$!a%h,
/ltho($h "ma!t is !e%o!tin$ not onl# %ositi-e net income le-els; b(t %ositi-e
t!en)s *o! the %ast two #ea!s; thei! $!oss ma!$ins a!e si$ni*icantl# lowe! than
in)(st!# as state) abo-e,
36
Margins
+ross Margin and 14erating Margin
Account 1996 1997 1998 RMA
9et Sales $31,437
M
$32,183
M
$33,67M See
Note
&ess CLS 77.9 77.6 78.2 67.6
$ross 8ar0in 22.42% 21.85% 21.84% 32.40%
&ess %e!atin$
18%enses
23.3% 20.0% 19.4% 26.9%
-/eratin0 8ar0in 2.46% 2.78% 3.30% 5.50%
9oteI R5/ sales )ata was not in%(t beca(se it was not com%a!able to
"ma!t which is one o* the to% th!ee !etaile!s ma=in$ (% 243 o* the )isco(nt
!etail ma!=et sha!e,
The L!oss 5a!$in an) the %e!atin$ 5a!$in both !e%!esent a
com%an#Hs abilit# to t!anslate sales )olla!s into %!o*it, These ma!$ins a!e
calc(late) at )i**e!ent sta$es o* meas(!ement,
The $!oss ma!$in is the !elationshi% between sales an) the cost o*
%!o)(ct sol), It is an acc(!ate meas(!ement in te!ms o* the com%an#Hs
abilit# to cont!ol costs o* $oo)s sol), Consi)e!ation is $i-en to the
com%an#Hs abilit# to %ass (na-oi)able %!ice inc!eases to the c(stome!s, In
most !ecent #ea!s; "ma!t has !emaine) consistent in its $!oss ma!$in; b(t it
37
is s(bstantiall# lowe! than the in)(st!# stan)a!) as seen abo-e, The lowe!
$!oss ma!$in can be att!ib(te) to "ma!tHs costs o* $oo)s sol) bein$
si$ni*icantl# hi$he! than in)(st!# stan)a!)s,
The o%e!atin$ %!o*it ma!$in meas(!es o-e!all o%e!atin$ e**icienc#, It
inco!%o!ates all e8%enses associate) with the o%e!ations o* the b(siness,
"ma!t has been s(ccess*(l at im%!o-in$ its o%e!atin$ ma!$in )(e to
cont!ollin$ o%e!atin$ e8%enses, %e!atin$ e8%enses we!e 16,43 in
com%a!ison to 26,63 in)(st!# a-e!a$e, /ltho($h; the o%e!atin$ e8%enses
we!e lowe! than in)(st!#; "ma!t+s o%e!atin$ ma!$in o* 3,348 !emains below
in)(st!# a-e!a$e o* 5,548, This a$ain can be att!ib(te) to costs o* $oo)s
sol) e8cee)in$ in)(st!# b# 14,63,
5I%*A ) Re'enue
Account 1996 1997 1998 Median
Peer
Co"4aris
on
1BIT A7235 A7215 A1;4615 9:/
Ce%!eciation 654 664 671 9:/
32
5I%*A =1A:<7M =1A::1M =1A76>M /)A
Re-en(e A31;437 A32;123 A33;674 9:/
5I%*A ) Re'enue 4.57 4.48 5.23 6.0
The 1BITC/ o! 1a!nin$s Be*o!e Inte!est; Ta8es; Ce%!eciation an)
/mo!tization to Re-en(e !atio has become a -al(able ba!omete! to a
com%an#Hs s(ccess, 1BITC/ is a meas(!e o* cash *low *!om the com%an#+s
o%e!ation, The ass(m%tion is that as 1BITC/ stea)il# im%!o-es; )ebt will
be !e%ai) an) a com%an#Hs balance sheet is acce%table an) %o!t!a#s a
s(ccess*(ll# !(n b(siness, This !atio shows the !aw ea!nin$ %owe! o* the
b(siness,
"ma!t has contin(e) to im%!o-e this !atio an) is ,77 *!om meetin$ the
Mme)ian %ee! com%a!isonM, This com%a!ison is ma)e (% o* the to% si8
!etaile!s in the in)(st!#, Cont!ib(tions to "ma!tHs s(ccess in this !atio
incl()e bette! me!chan)isin$ an) im%!o-e) in-ento!# mana$ement,
Cons(me!s a!e att!acte) to this *o!m o* the !etail in)(st!#; beca(se o* thei!
-al(e o* b!an) names at )isco(nt %!ices,
36
Conclusion
The *ollowin$ table i)enti*ies =e# st!en$ths an) wea=nesses i)enti*ie)
th!o($h the histo!ical anal#sis o* "ma!t,
Strengt!s 6ea#nesses
Cas!$ "ma!t is maintainin$ %ositi-e net
cash a*te! o%e!ations to se!-ice thei! )ebt,
@owe-e!; net cash a*te! o%e!ations has
)ecline) 523 o-e! the th!ee #ea! %e!io)
1666-1662, The cash %osition co(l) be
-iews as a st!en$th o! wea=ness,
"ma!t has a A2,5 billion !e-ol-in$ c!e)it
a$!eement,
Cas!$ Cash balances a!e 643 less
than the in)(st!#, In a))ition; net cash
a*te! o%e!ations has )ecline) 523 o-e!
the th!ee #ea! %e!io) 1666-1662,
Accounts Paya(le$ /7C@ is 4,61
sho!te! than the in)(st!# a-e!a$e !es(ltin$
in "ma!t %a#in$ 143 *aste! than the
in)(st!# !es(ltin$ in the (se o* cash o*
In'entory$ "ma!t is ca!!#in$ 223
abo-e the in-ento!# no!m, I9GC@
is 17,64 )a#s lon$e! than the in)(st!#
!es(ltin$ in a lon$e! o%e!atin$ an)
44
a%%!o8imatel# A316, cash con-e!sion c#cles !es(ltin$ in the
(se o* cash o* a%%!o8imatel# A1;222,
5I%)Interest$ 1BIT inc!ease) 343
while inte!est )ec!ease) 36,63 o-e! the
1666-1662 %e!io) !es(ltin$ TI1
inc!easin$ b# 1153,
Cost o- +oods Sold$ Cost o* $oo)s
sol) is 163 abo-e the in)(st!#
a-e!a$e !es(ltin$ in a lowe! $!oss
ma!$in o* 21,243 in com%a!ison to
32,443 in)(st!# a-e!a$e, In a))ition;
the o%e!atin$ ma!$in is a**ecte) b#
cost o* $oo)s sol) at 3,343 -e!s(s the
5,543 in)(st!# a-e!a$e,
Sales +ro,t!$ Sales $!owth has
im%!o-e) 7,123 o-e! the th!ee #ea!
%e!io) 1666-1667,
Sales)net ,or#ing ca4ital ratio$
Sales:net wo!=in$ ca%ital !atio is
35,613 $!eate! than the in)(st!#, It
a%%ea!s that "ma!t is *inancin$ c(!!ent
assets with lon$-te!m )ebt,
@5%)%otal AssetsI 1a!nin$s be*o!e
ta8es o* 2,33 is consi)e!able lowe! than
the in)(st!# a-e!a$e, The 31BT:Total
/ssets !atio is less than the in)(st!#, 1BT
is a%%!o8imatel# 52,63 below in)(st!#
a-e!a$e )(e to the hi$he! CLS which
!es(ltin$ in lowe! $!oss ma!$ins an)
Sa"e store salesI Same sto!e sales
!emaine) constant *o! 1667 an) 1662
an) was lowe! >4,28? than the in)(st!#
6,58 *o! 1662,
41
o%e!atin$ ma!$ins, 1a!nin$s be*o!e ta8es
ha-e inc!ease) o-e! the 1666-1662 %e!io)
b# 1423,
5I%R) Interest 5x4ense?Rent
5x4enseI The me)ian %ee! 1BIT ma!$in
is a%%!o8imatel# 3,63 -e!s(s "ma!t+s
3,243 ma!$in, The lowe! !atio in
com%a!ison to thei! %ee!s is att!ib(te) to
the lowe! 1BIT ma!$in,
Sales)net -ixed assets$ Sales inc!ease)
b# 73 while net *i8e) assets inc!ease)
b# 3,63 o-e! the th!ee #ea! %e!io),
/s a !es(lt; sales:total net *i8e) assets
has inc!ease) o-e! the th!ee #ea!
%e!io),
Inco"e gro,t!$ Income $!ew 2413
o-e! the th!ee #ea! %e!io), @owe-e!; )(e
to e8%enses associate) with )i-estin$
s(bsi)ia!ies; "ma!t !e%o!te) losses *o!
*iscal #ea! en)e) 1666, In a))ition;
"ma!t boo=e) e8%enses *o! ea!l#
!eti!ement %!o$!ams,
Leases 's9 1,n$ "ma!t leases 2;451
an) owns 114 o* thei! *acilities,
*e(t Ser'ice Co'erage$ Cebt se!-ice
co-e!a$e is 4,148 *o! 1662 -e!s(s 2,668,
This inc!ease in the !atio is att!ib(te) to
the la!$e $!owth in net income o*
213,423 an) 142,433 co(%le) with the
)ec!ease in total )ebt se!-ice o* 163,
42
i(liogra4!y
&ane#; Nanice, Ban= o* /me!ica Retail 7ee! /nal#sis; 1662, 7$s, 62-74,
"ma!t Co!%o!ation, /()ite) Financial Statements; 1666-1662,
Robe!t 5o!!is an) /ssociates In)(st!# Cata,; 1662, 7$s, 654-655,
43