As the economy seemed to boom in the United States so too did the fortunes of Wal-Mart, the world’s largest retailer. When the United States, and the world, entered the greatest recession since the Great Depression in 2007-2008, however, consumers stopped making purchases and many feared all retailers would soon face significant financial difficulties. This has not been the case for Wal-Mart. Because Wal-Mart has always promoted low prices customers seemed to flock to Wal-Mart due to the recession. While some have indicated that prior to the recession Wal-Mart was facing slowing sales due to competition with Target, its stores actually increased sales after the recession (Palmeri, 2008). The company’s low prices brought new customers to the store who had not previously considered shopping at Wal-Mart “cool” and increased sales to existing customers (Palmeri, 2008).
To see whether the recession continues to help Wal-Mart and how the company is doing overall, however, one needs to review its financial statements. By looking at the company’s financial results over the past two years one can see whether there are positive or negative trends in its financial results. These trends provide a means to determine whether the company is moving toward a positive or negative situation. Past performance is often a good predictor of future performance, so looking at how financial accounts and ratios change over time one can better forecast future results (Managerial accounting, 2010).
The current ratio provides an indication of how liquid a company is. Liquidity indicates how well a company can cover its current debts. Wal-Mart’s current ratio in 2009 was .88 and in 2010 was .87. The fact that the company’s current ratio barely changed indicates that its liquidity has remained constant. Because its current ratio is less than one, however, the company needs more than its current