https://www.sec.gov/search-filings
Review the current financial statements of Walmart.
Option 1: EDGAR | Company Filings database
Enter "Walmart Inc." in the search bar
Option 2: Yahoo! Finance webpage
Enter the stock symbol of Walmart, Inc. (WMT) in the search bar
Click on the “Financials” tab
In prior weeks, you learned about finance and financial analysis. This week, you will put it all together. Using your selected country, you will complete a comprehensive recommendation to Walmart executives either recommending or forgoing expansion into your selected country.
In your paper,
Summarize the culture and financial climate of the country and why it would be favorable or unfavorable for Walmart to expand in that region.
Describe your country’s foreign exchange rates and how those rates could impact Walmart’s future financial performance. Be sure to address:
interest rates,
balance of payments,
government policies, and
other factors, such as taxes and tariffs.
Describe how Walmart needs to manage foreign exchange risk.
Analyze any potential political risk and its impact to the financials.
Propose how Walmart should fund this new expansion.
Sample Answer
This comprehensive recommendation addresses Walmart's potential expansion into Canada, a market where Walmart already has a significant, established presence (Walmart Canada). The recommendation is to FORGO a major new expansion of physical stores, but instead, aggressively fund an expansion of its e-commerce and logistics infrastructure to leverage its existing platform and mitigate specific financial risks.This comprehensive recommendation addresses Walmart's potential expansion into Canada, a market where Walmart already has a significant, established presence (Walmart Canada). The recommendation is to FORGO a major new expansion of physical stores, but instead, aggressively fund an expansion of its e-commerce and logistics infrastructure to leverage its existing platform and mitigate specific financial risks.
Managing Foreign Exchange Risk
Walmart must manage the two primary types of FX risk:
Translation Risk: The risk that the value of foreign assets, liabilities, and equity will change on the consolidated financial statements due to FX fluctuation.
Management: Walmart utilizes a net investment hedge using forward contracts or foreign currency denominated debt to offset the impact of CAD depreciation on the translation of its Canadian net assets.
Transaction Risk: The risk that a specific future foreign currency transaction (e.g., paying a Canadian supplier) will be valued differently when the transaction settles.
Management: Walmart uses forward contracts and foreign currency options to lock in an exchange rate for anticipated future CAD-denominated cash flows, ensuring predictable margins on Canadian sales and purchases.
Economic Risk: The risk that cash flows will be affected by unexpected currency fluctuations over the long term.
Management: Local Sourcing and Natural Hedging. By increasing the proportion of goods sourced and sold in CAD within Canada, Walmart creates a natural hedge, matching its Canadian revenues with its Canadian costs.