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Target And Walmart Working Capital

Working capital refers to the “firm’s total current assets, cash, marketable securities, accounts receivable, and inventory. ” (Hardcastle, 2006) These are resources that the company can immediately utilized within a given year. Working capital (as of 2005) of Target Company includes the following: revenues amounting to 14 million dollars, advertising costs amounting to 1,028 million dollars, discounted operations amounting to 761 million dollars, earnings per share of 2. 71 million dollars, cash equivalents of 1,172 million dollars, accounts receivable of 451 million dollars, and inventory amounting to 872 million dollars.

Other current assets include vendor income and other receivables of 560 million dollars, deferred taxes of 344 million dollars and other sources amounting to 349 million dollars. The working capital of WalMart Company includes the following: cash and cash equivalents worth 5,488 million dollars, receivables amounting to 1,715 million dollars, inventories worth 29,762 million dollars and prepaid expenses and other sources worth 1,889 million dollars. The values given above for WalMart Company and Target Company include all the accounts from all of its subsidiaries.

The cash and cash equivalents are acquired from payments made from banks like debit cards, credit cards and the EBT or “electronic benefit transactions”. Receivables are generated from anticipated incomes from the future like insurance claims and credit card payments, and inventories are priced with the lowest retail prices. Internal control plays an important role for the performance of a company. These controls involve the financial intermediaries of a company and its regulatory boards which monitor the performance of the company, specifically on its financial aspects.

Such activities done by these company intermediaries are the accounting and auditing of the financial statements of the company. The duties of these Financial intermediaries is by helping the financial markets assist the exchange of legal claims, which includes bonds, stocks, insurance, and even bank deposits. These intermediaries must be of great accuracy and should be reliable to ensure that there is no corruption going on in the company since it includes the transactions of huge amounts of money.

It is important for these financial intermediaries to be efficient with their work. They should be accurate and reliable to prevent the possible occurrence of frauds. An executive of WalMart Company is reported to be found guilty of fraud and tax evasion, thus stealing about hundreds of thousand million dollars from the company. This is done by altering or falsifying financial reports and or secretly conniving with the company’s auditor to transfer some accounts to his name. Because of these reports, the government had implemented the 2002 Sarbanes-Oxley Act.

It is an act composed of two bills, which are the bills of Rep. Oxley and Senator Sarbanes. The two bills are almost similar which lead to the formation of a reference committee that would identify their differences that would strengthen the said bill. And on July 30, 2002, the “Sarbanes-Oxley Act” was established. Some of its provisions include the institution of a Public Company Accounting Oversight Board which would monitor and evaluate the efficiency and effectiveness of the financial reporting made by the company’s internal controls.

Another provision includes that the financial reports should be certified by the CEOs or the Chief Financial Officers. (The Sarbanes-Oxley Act Community Forum, 2003) Many companies have experienced the impact of the Sarbanes-Oxley Act of 2002. Many companies fail to meet some requirements regarding the act. Some of it is the correctness of the financial statements of the companies. They do not present it clear enough to report all operations and financial transactions of the company.

Another example is that many companies fail to submit an “internal control report” which evaluates a company’s control of its internal management, procedures and structures. The report must also include an evaluation of the management regarding the controls. From a newsletter report, it said that many companies fail to comply with these requirements and are reported to have “material weaknesses or noticeable shortcomings with regards to its internal controls. The newsletter also stated that the number of these undesirable reports have been increasing for the past months.

Under the Sarbanes-Oxley’s act, the companies are required to evaluate the efficiency and effectiveness of the control of the company over its financial reports. The companies are experiencing problems on the procedure of their inventory processes, the settlement of their accounts, inexperienced or incapable finance staffs and deficiency with regards to its information technology status. There was a case reported where an executive personnel is working full time but is tested to lack expertise on his position.

And because companies must agree with their report on these “material weaknesses” the company’s management staff and the company’s auditor must agree with one another. But if conflict arises, the company auditor still monopolizes the decision which, sometimes, leads to the termination of these personnel. Another effect of this act is the delay of the filing of the company’s annual financial reports which could cause inefficiency of the company’s record management. (BusinessJournalism. org, 2005)


2005 WalMart Annual Report. , http://www.walmartstores. com/Files/2005AnnualReport. pdf 2005 Target Annual Report. , http://media. corporateir. net/media_files/irol/65/65828/reports/newar05. pdf Business Journalism. org, 2005. http://www. businessjournalism. org/pages/biz/2005/01/companies_feel_impact_of_sarba/ Hardcastle, J. , 2006, Working Capital Management http://ezinearticles. com/? Working-Capital-Management&id=308162 The Sarbanes-Oxley Act Community Forum, 2003, http://www. sarbanes-oxley-forum. com/ http://www. insidesarbanesoxley. com/sarbanes_oxley_blog/archive/2006_01_01_index. asp, 2006

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