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4/30/2023 1 DuPont Ratio Analysis - ROA 2013 2014 2015 8.93% 9.16% 8.30% Return on Assets [(Net Profit+Interest Expense*(1- t)] / Avg. Total Assets 3.82% 3.85% 3.47% Profit Margin for ROA [(Net Profit + Interest Expense*(1- t)] / Sales 2.34 2.38 2.39 Asset Turnover (Sales / Avg. Total Assets) Note: Tax rate 35% DuPont Ratio Analysis – ROA (Excluding nonrecurring items) 2013 2014 2015 8.86% 9.02% 8.3% Return on Assets [(Net Profit + Interest Expense*(1- t) ± one-time gains or losses (1-t) ] / Avg. Total Assets 3.79% 3.79% 3.47% Profit Margin for ROA [(Net Profit + Interest Expense*(1- t) ± one-time gains or losses (1-t) ] / Sales 2.34 2.38 2.39 Asset Turnover (Sales / Avg. Total Assets) Note: Tax rate 35% DuPont Ratio Analysis – ROA Profit Margin Decomposition 2013 2014 2015 24.82% 24.83% 25.13% Gross Margin (Gross Profit / Sales) 5.64% 5.59% 5.00% Operating Margin (Operating Profit / Sales) 19.18% 19.24% 20.13% SG&A Expense to Sales 0.49% 0.51% 0.53% Interest Expense to Sales 32.87% 32.20% 30.31% Effective Tax Rate (Income Taxes / Pre-tax Income) DuPont Ratio Analysis – ROA Assets Turnover Decomposition 2013 2014 2015 70.85 72.19 77.75 A/R Turnover (Sales / Avg. AR) 5.15 5.06 4.69 Days AR Outstanding 8.08 8.11 8.06 Inventory Turnover (Cost of sales / Avg. Inventory) 45.19 44.99 45.30 Days Inventory Outstanding 4.06 4.14 4.14 Fixed Asset Turnover (Sales / Avg. Net PP&E) DuPont Ratio Analysis - ROE 2013 2014 2015 21.00% 20.76% 18.15% Return on Equity (Net Income Available to Common Shareholders) / Avg. Equity 3.36% 3.37% 3.05% Profit Margin for ROE (Net Income Available to Common Shareholders) / Sales 2.34 2.38 2.39 Asset Turnover (Sales / Avg. Total Assets) 2.67 2.59 2.49 Financial Leverage (Avg. Total Assets / Avg. Equity ) DuPont Ratio Analysis – ROE (Excluding nonrecurring items) 2013 2014 2015 20.81% 20.40% 18.15% Return on Equity (Net Income Available to Common Shareholders ± one-time gains or losses (1-t) ) / Avg. Equity 3.36% 3.31% 3.05% Profit Margin for ROE (Net Income Available to Common Shareholders ± one-time gains or losses (1-t) ) / Sales  For 2014, compute ROE and profit margin for ROE excluding non-recurring items. 12 13 14 15 16 17

4/30/2023 2 Comments on Profitability  The ROA increased from 8.93% in 2013 to 9.16% in 2014, then decreased back to 8.3% in 2015.  These fluctuations reflect a similar increase and decrease in the profit margin for ROA across the three years (3.82%  3.85%  3.47%).  Total assets turnover is relatively stable, but in slightly increasing trend 2.34  2.38  2.39. Comments on Profitability (continued)  Profit margin for ROA : The interesting observation is that Gross Margin continually increased , whereas Operating Margin continually decreased .  Increase in gross margin is due to  Improved margins in food, general merchandise, and consumables  Changes in the merchandise mix in the International segment  A reduction in low margin fuel sales in the Sam's Club  Decrease in operating margin is due to  An increase in wage expense at the U.S. segment due to the new associate wage structure and increased associate hours to improve the overall customer experience  Investments in digital retail and information technology Comments on Profitability (continued)  Profit margin for ROA :  Interest expense to sales ratio remains stable with small increasing trend.  Tax burden is in slightly declining trend ( 32.9%  32.2%  30.3% )  Walmart does not clearly identify the reason for this declining trend. All that is noted in the 10-K is, “Our effective tax rate fluctuates from period to period and may be impacted by a number of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in laws, outcomes of administrative audits, the impacts of discrete items and the mix of earnings among our U.S. and international operations.” Comments on Profitability (continued)  Total Assets Turnover :  The change in total assets turnover between 2013 and 2015 reflects a combination of increasing accounts receivable turnover combined with flat inventory and fixed assets turnovers.  Accounts receivable is a relatively small fraction of the total assets, so the decreasing accounts receivable turnover had little effect on the total assets turnover.  The ROE was stable between 2013 and 2014 at 21.00% and 20.76%, but fell to 18.15% in 2015.  This trend reflects declines in both the profit margin for ROE (3.36%  3.37%  3.05%) and capital structure leverage (2.67  2.59  2.49).  The decline in profit margin for ROE is consistent with the declines in profit margin for ROA. Comments on Profitability (continued) Comments on Profitability (continued)  Financial leverage :  The steady decrease in financial leverage results from a combination of decreased long-term debt (including current maturities) and short-term borrowing, slightly offset by increased capital lease and financing obligations.  In addition, the increased level of retained earnings contributes significantly to the decline in capital structure leverage. 18 19 20 21 22 23

4/30/2023 3 Short-term Liquidity Risk 2013 2014 2015 0.88 0.97 0.93 Current Ratio (Current Assets / Current Liabilities) 0.20 0.24 0.22 Quick Ratio (Quick Assets / Current Liabilities) 0.10 0.14 0.13 Cash Ratio (Cash / Current Liabilities) 0.33 0.42 0.42 CFO to Current Liability (CFO / Avg. Current Liabilities)  Compute CFO to Current Liability for 2015. Short-term Liquidity Risk 2013 2014 2015 70.85 72.19 77.75 A/R Turnover (Sales / Avg. AR) 5.15 5.06 4.69 Days AR Outstanding 8.08 8.11 8.06 Inventory Turnover (Cost of sales / Avg. Inventory) 45.19 44.99 45.30 Days Inventory Outstanding 9.51 9.64 9.37 A/P Turnover (Purchases / Avg. AP) 38.37 37.87 38.95 Days AP Outstanding 11.98 12.17 11.05 Cash Conversion Cycle  Compute Cash Conversion Cycle for 2015. Long-term Solvency Risk 2013 2014 2015 0.60 0.58 0.58 Liabilities to Assets (Total Liabilities / Total Assets) 1.52 1.37 1.39 Liabilities to Equity (Total Liabilities / Total Shareholders’ Equity) 0.55 0.51 0.53 Long-term Debt to Equity (Long-term debt / Total Shareholders’ Equity) 11.56 11.08 9.49 Interest Coverage Ratio [(Net Profit + Interest Expense + Tax Expense)] / Interest Expense  Compute Interest Coverage Ratio for 2015. Distress Risk: Altman Z Score 2013 2014 2015 4.41 4.81 4.53 Altman Z Score ( 1.2*Working Capital + 1.4*Retained Earnings + 3.3*EBIT + 0.6*Market Leverage+ 1.0* Sales ) ※all variables are scaled by total assets except for leverage Comments on Risk  Short-Term Liquidity Risk :  Walmart’s short-term liquidity ratios suggest fluctuations but little change over the three-year period.  A current ratio around 1.0 and a quick ratio around 0.2 might appear troublesome for some firms. However, Walmart is essentially a cash business since it turns accounts receivables over very quickly (every 5 days on average).  In addition, it turns inventory over quickly (on average 45 days). Thus, its inventory is almost as liquid as the receivables of most other businesses.  Its cash flow from operations to current liabilities is above the approximate 40% benchmark for a healthy firm.  Overall, Walmart subject to very low short-term liquidity risk Comments on Risk (continued)  Long-Term Solvency Risk :  Walmart’s total liabilities to total assets ratio decreased slightly between 2013 and 2015. Similarly, the long-term debt ratio decreased from 2013 to 2015, consistent with a slight shift in Walmart’s capital structure away from long-term borrowings.  This is understandable given anticipated increases in interest rates during these years.  Its interest coverage ratio is very high. although it has steadily decreased from above 12 in 2013 to below 10 in 2015.  Altman’s Z score is far above the cut-off of 2.7 for healthy firms.  Thus, long-term solvency risk is also low for Walmart. 24 25 26 27 28 29

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4/30/2023 4 Dividend and Market-based Ratios 2013 2014 2015 4.90 5.07 4.58 EPS [Net profit attributable to ordinary shareholders / weighted avg. # of ordinary shares] 15.24 16.76 14.73 PER (Stock price / EPS) 2.51% 2.25% 2.91% Dividend Yield (Dividend per share / Stock price) 0.38 0.38 0.43 Dividend Payout (Cash Dividends per share / EPS) *The weighted average shares outstanding: 3,207 (2015), 3,230 (2014), 3,269 (2013) *Closing stock prices: 67.50 (2015), 84.98(2014), 74.68(2013)  Compute Dividend Yield for 2015. Cross-sectional Comparison-Competitors  Carrefour , headquartered in France, is Europe’s largest retailer and the second largest retailer in the world. It has 4 segments based on store formats, which include the following (number of stores in parentheses):.  Hypermarkets (1,481) : Offer a wide variety of household and food products at competitively low prices.  Supermarkets (3,462) : Sell traditional grocery products under the Market, Bairro, and Supeco store brands.  Convenience Stores (7,181) : Offer a limited variety of food products in smaller stores at aggressively low prices.  Cash & Carry (172) : Provides professional restaurant and shop owners food and nonfood products at wholesale prices.  Target , headquartered in the United States, is a retailer that offers a wide variety of clothing, household, electronics, and entertainment.  Attempt to differentiate itself from Walmart by pushing trendy merchandising with more brand-name products. Target emphasizes customer service, referring to its customers as “guests” and focusing on the theme of “ Expect More, Pay Less. ”  Attempts to differentiate itself from competitors by providing wider aisles and a less cluttered store appearance.  Discontinued its Canadian operations in 2014, which led to a significant nonrecurring loss in that year. Cross-sectional Comparison-Competitors Target Walmart Cross-sectional Comparison on ROA Cross-sectional Comparison on ROA 30 31 32 33 34 35

4/30/2023 5 Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s ROA is more steady range from 8% to 9%. Target’s ROA spans a wider range and is disproportionately affected by a large charge for closure of its Canadian operations in 2014. Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s ROA is more steady range from 8% to 9%. Target’s ROA spans a wider range and is disproportionately affected by a large charge for closure of its Canadian operations in 2014.  Target’s Higher Profit Margin for ROA: This is consistent with Target's business model of providing higher brand-name products. Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s ROA is more steady range from 8% to 9%. Target’s ROA spans a wider range and is disproportionately affected by a large charge for closure of its Canadian operations in 2014.  Target’s Higher Profit Margin for ROA: This is consistent with Target's business model of providing higher brand-name products.  Target’s COGS is about 70% of sales, lower than the 75–76% for Walmart. But, SG&A expense to sales is somewhat larger than Walmart’s, consistent with its strategy of providing a more pleasant shopping environment for customers. Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s Higher Assets Turnover : Walmart’s higher asset turnover results from higher turnovers for inventories and fixed assets.  Target’s accounts receivable are so immaterial that no separate disclosure is made, hence no turnover can be computed.  Walmart’s faster inventory turnover might result from a larger proportion of sales from grocery products. It also might result from more effective inventory control systems. Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s Higher Assets Turnover : Walmart’s higher asset turnover results from higher turnovers for inventories and fixed assets.  Target’s accounts receivable are so immaterial that no separate disclosure is made, hence no turnover can be computed. Cross-sectional Comparison on ROA  Walmart vs. Target :  Walmart’s Higher Assets Turnover : Walmart’s higher asset turnover results from higher turnovers for inventories and fixed assets.  Target’s accounts receivable are so immaterial that no separate disclosure is made, hence no turnover can be computed.  Walmart’s faster inventory turnover might result from a larger proportion of sales from grocery products. It also might result from more effective inventory control systems.  Walmart’s has more efficient use of fixed assets (stores) than Target does. This is consistent with the fact that Walmart does not strive as Target does to provide wide aisles and make the shopping experience more pleasant for customers. 36 37 38 39 40 41

4/30/2023 6 Cross-sectional Comparison on ROA  Walmart vs. Carrefour :  Walmart’s higher ROA over Carrefour results from higher profit margins for ROA and a faster assets turnover. Cross-sectional Comparison on ROA  Walmart vs. Carrefour :  Walmart’s higher ROA over Carrefour results from higher profit margins for ROA and a faster assets turnover.  Walmart’s Higher Profit Margin for ROA results from higher gross margins . Walmart has slightly higher effective income tax rate, since U.S. has one of the highest corporate tax rates in the world. Cross-sectional Comparison on ROA  Walmart vs. Carrefour :  Walmart’s higher ROA over Carrefour results from higher profit margins for ROA and a faster assets turnover.  Walmart’s Higher Profit Margin for ROA results from higher gross margins . Walmart has slightly higher effective income tax rate, since U.S. has one of the highest corporate tax rates in the world.  Carrefour and Walmart exhibit similar SG&A expense to sales. Additionally, both companies show small but steady increases in these expenses across 2013 through 2015. Nevertheless, Carrefour has slightly higher costs in each year. This is likely due to the wider variety of store concepts that Carrefour has, which would increase marketing and other administrative expenses.. Cross-sectional Comparison on ROA  Walmart vs. Carrefour :  Walmart’s Higher Assets Turnover : Walmart’s higher asset turnover results from combination of higher turnovers for accounts receivable and other assets, but lower turnovers for inventories and fixed assets. Cross-sectional Comparison on ROA  Walmart vs. Carrefour :  Walmart’s Higher Assets Turnover : Walmart’s higher asset turnover results from combination of higher turnovers for accounts receivable and other assets, but lower turnovers for inventories and fixed assets.  Carrefour licenses its name to franchisees and has receivables due from the franchisees, which likely turn over at a slower rate.  Carrefour’s faster inventory turnover from a higher proportion of its sales coming from grocery products and convenience stores.  Carrefour’s fixed asset turnover is larger than that of Walmart, indicating Carrefour’s more efficient use of fixed assets.  Another reason is that Carrefour has significant intangible assets on B/S. Cross-sectional Comparison on ROE 42 43 44 45 46 47

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4/30/2023 7 Cross-sectional Comparison on ROE  Walmart has a more stable and higher ROE, while taking less aggressive financial leverage.  Walmart, with its higher ROA, has a greater capacity to take advantage of financial leverage. The higher ROA would likely provide it with a larger excess of the return on asset over the cost of borrowing and thereby increase the returns to common shareholders.  However, Carrefour has higher proportion of liabilities in its capital structure; therefore, of the three companies, it has used financial leverage most aggressively. Note that Carrefour has the smallest ROA in 2015, which might lead the analyst to expect that it would not take on such high proportions of debt in its capital structure. Cross-sectional Comparison on ROE  Walmart has a more stable and higher ROE, while taking less aggressive financial leverage.  Walmart, with its higher ROA, has a greater capacity to take advantage of financial leverage. The higher ROA would likely provide it with a larger excess of the return on asset over the cost of borrowing and thereby increase the returns to common shareholders.  However, Carrefour has higher proportion of liabilities in its capital structure; therefore, of the three companies, it has used financial leverage most aggressively. Note that Carrefour has the smallest ROA in 2015, which might lead the analyst to expect that it would not take on such high proportions of debt in its capital structure. Cross-sectional Comparison on Risk Cross-sectional Comparison on Risk  Carrefour has the most short-term liquidity risk . Carrefour’s current ratio is considerably less than 1.0, and its cash flow from operations is much less than the 40% found for healthy companies. Cross-sectional Comparison on Risk  Carrefour has the most short-term liquidity risk . Carrefour’s current ratio is considerably less than 1.0, and its cash flow from operations is much less than the 40% found for healthy companies.  Carrefour stretches out payments to suppliers to 80 days, which is much longer than either Target or Walmart. Cross-sectional Comparison on Risk  Carrefour has the most short-term liquidity risk . Carrefour’s current ratio is considerably less than 1.0, and its cash flow from operations is much less than the 40% found for healthy companies.  Carrefour stretches out payments to suppliers to 80 days, which is much longer than either Target or Walmart.  Carrefour’s low cash flow from operations is the result of weak profitability, which tends to reduce cash flow from operations.  Neither Target nor Walmart displays much short- term liquidity. 48 49 50 51 52 53

4/30/2023 8 Cross-sectional Comparison on Risk  Carrefour also has relatively high long-term solvency risk.  Its total liabilities to total assets ratios are the highest of the three companies and its cash flow and interest coverage ratios are the lowest. Cross-sectional Comparison on Risk  Carrefour also has relatively high long-term solvency risk.  Its total liabilities to total assets ratios are the highest of the three companies and its cash flow and interest coverage ratios are the lowest.  Carrefour’s size and market dominance in Europe suggest that it is not likely to go bankrupt, but its risk ratios are worrisome.  Neither Target nor Walmart displays much long-term liquidity risk. 54 55

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