george92 said:
FriendlyAg said:
Casey TableTennis said:
Not all current liabilities are "debt".
Yes and no. Technically all liabilities are obligations to pay someone, which is debt.
What about deferred revenue? How about billings in excess of costs in relation to long term contracts?
Those are still liabilities. You're still liable to preform the work in order to receive revenue which costs assets sometimes in order to complete. If I have 5 dollars In cash and I owe you work that will cost me 3 dollars to complete so I can recognize my revenue of 5 dollars that I accepted a month ago, don't you think that should be factored in as debt? It directly effects your equity.
There is a whole lot of "it depends". Financial statement analysis depends largely on the industry you're looking at when you want to pull apart and compare ratios. You also have to compare to Like size companies in the same industry.
Having not even looked at Walmart's financials, I'm not sure what a pure long term debt over equity ratio would tell you. They probably own a lot of land, buildings, and FFE. But they also have a ton of current liabilities as well as other obligations like any large company would.
Mainly because their financials are probably going to be much more complex than just long term debt and a single line of credit for working capital.
What's healthy for them? Who's their benchmark? They largely are the benchmark so you'd have to find several other large retailers and compare their numbers and think about how their strategies differ.
After you look at their total liabilities over total equity, debt/equity, then you should look at their ability to create cash flow to service their debts. They can temporarily be caught at a point in time where they appear over leveraged but they have ample cash flow to reduce that. You also want to look at their working capital history.
In many ways you have to understand they all companies have different personalities running them. Some run with higher risk than others and some are painfully conservative. You need to be able to form a story from the numbers that you're able to understand that if push comes to shove, what would happen and how strong are they?