Problem
Integrative Sase: Walmart
The financing activities section of the statement of cash flows is an excellent source of information about a firm's current transactions in debt and equity. Review Walmart's fiscal 2020 (ended January 31, 2021) consolidated financial statements and the notes pertaining to debt and equity (notes 6, 7, and 8) to do the following:
I. Using the statement of cash flows, render an opinion about Walmart's stage within its life cycle. Provide specific evidence to support your conclusion.
II. what effects does Walmart's fiscal 2020 financing activities have on its long-term debt-to-equity ratio?
III. analysts will have to compute the percentage of debt and equity in the capital structure in order to assess solvency risk. Using the balance sheet, income statement, and notes 6 and 7, compute the percentage of capital provided by lenders as of January 31, 2021 (i.e., the percentage of debt capital).
IV. You will learn in chapter 11 that computing the weighted average cost of capital requires you to multiply the percentage you calculated in your answer to question 3 by an interest rate. What interest rate would you assign to the debt percentage?
Walmart has not chosen the fair value option for debt, but it must still disclose debt fair values in note 8. If Walmart had chosen the fair value option and applied it each year, what would be the gain or loss for fiscal 2020? Where would Walmart report the gain or loss?