Financial metrics,how they can be used to mine data from a company’s financial statements to provide valuable insight into a company’s financial performance efficiency.

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Module 4 article attached addresses the Cash-to-Cash Cycle Time (also referred to as the cash conversion cycle) which utilizes three of the asset management efficiency metrics. Please address the following questions:  

  1. Why is the cash conversion cycle metric a meaningful metric?  
  2. What specific areas are measured in this metric and why are these areas are a “big deal” worthy of close scrutiny?
  3. Would an investor (or potential investor) prefer to see a higher or lower cash conversion cycle metric result?  
  4. Using the Walmart annual report posted in the supplemental materials folder and the prior annual reports available at the websites provided in the the “Supplemental Course Materials” folder, calculate  Walmart’s cash conversion cycle for 2014, 2013, & 2012 and address the 3-year trend (in other words, is it trending better or worse)?  Note: For the Days of Inventory and Days of Payable calculations, use Cost of Goods Sold.  For the Days of Receivables calculation, only use Net Sales (excl. Members & other income).  
  5. Do the Walmart cash conversion numbers calculated in question 4 indicate Walmart is a strong performer or a weak performer?  What does the year-over-year trend indicate to you?

 Reference the “Metric of the Month: Cash-to-Cash Cycle Time” article attached (Module 4).