Wal-Mart Valuation Report Analysis of Wal-Mart's annual report provides a positive outlook on Wal-Mart's financial health. Given the specific ratios and comparison with other companies in the same industry, Wal-Mart is the leader and will most likely continue to dominate. Although Wal-Mart has not been a leader in all numbers, its leadership and strong market presence solidify continued success. The review of current ratio, quick ratio, inventory turnover ratio, debt ratio, net profit margin ratio, ROI, ROE and P/E ratio all indicate an optimistic future for the company. The current ratio, which is defined as current assets divided by current liabilities, is a measure of how many liabilities a company has relative to its assets. Wal-Mart in the year 2007 had a current ratio of 0.90 and in January 2008 it had a current ratio of 0.81. The quick ratio, defined as current assets minus inventory divided by current liabilities, is a measure of a company's ability to pay short-term obligations. Wal-Mart in 2007 had a quick ratio of 0.25 and in January 2008 it had a ratio of 0.21. Both the current ratio and the quick ratio are a measure of liquidity. Wal-Mart is not as liquid as its competitors like Costco or Family Dollar Stores Inc. I believe the reason why Wal-Mart is not too liquid is because they are heavily investing their profits for expansion and growth. Management says in its financial report that holding cash reserves in other currencies has helped Wal-Mart protect itself from inflationary pressures in the U.S. dollar. The next ratio to consider is the inventory ratio which is defined as the cost of sales divided by the average inventory. In the year 2007, Wal-Mart's inventory ratio was 7.68 and in January 2008, it was 7.96. Wal-Mart makes a lot of sales, so it doesn't have too much trouble holding too much inventory. Its competitors have similar ratios even though they don't have the same sales as Wal-Mart. Wal-Mart's ability to sell at lower prices for the same quality gives them an edge over the competition. In 2007, Wal-Mart had a debt-to-GDP ratio of 0.58, while in January 2008 it had a debt-to-GDP ratio of 0.59. The debt-to-GDP ratio is calculated by dividing its total debt by its total assets. Wal-Mart has many more assets than debt, so Wal-Mart is not overleveraged.