Class Work by Jill Stidd

For this Web Field Trip you will review the annual reports of the Coca Cola Company and Wal-Mart, two of the largest publicly traded firms in America.
Coca Cola
Go to http://www.thecoca-colacompany.com/investors/annual_other_reports.html. This page shows a link to the 2006 annual report.You will need to scroll through the annual report to find the information that you need to answer the questions. Remember what you learned in Accounting I about financial statements to help you find what you need.
Wal-Mart
Go to http://investor.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome. Find the financial information and then annual reports. You will need to scroll through the annual report to find the information that you need to answer the questions. Remember what you learned in Accounting I about financial statements to help you find what you need.
Discussion Question
Please respond to this Discussion Question using the information from the Web Field Trip above. Take time to review the responses of your classmates and provide your feedback.
Compare the accounts receivable turnover ratios for Coca-Cola and Wal-Mart. What characteristic(s) of these companies would indicate that these ratios are reasonable?

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My Response: 8 Sep 08 12:44 PM MST


Initial post: Jill Stidd

Coca-colaAccounts receivable turnover = (net sales) / (average accounts receivable)(24,088 ) / (2,587) +( 2,281) / 2 the AR net realizable values for both years INCLUDE the estimated write off.

To support this statement Coca Cola 2006 report states, “We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for doubtful accounts. We calculate this allowance based on our history of write offs, level of past-due accounts based on the contractual terms of the receivables, and our relationships with and the economic status of our bottling partners and customers.” http://www.thecocacolacompany.com/investors/pdfs/form_10K_2006.pdf . p.76

9.90= (24,088 ) / 2434

Answer 9.90 Accounts receivable turnoverWal-Mart($312,427) / (2,662) +( 1,715) / 2($312,427) /4377 /2($312,427) / 2188,50

Answer 142.76 Accounts receivable turnover

I would say that Coca Cola is completely different customer base from Wal-Mart. The account receivables also come from different sales strategies. Coca-cola, in that it ultimately sells beverage retail products to a consumer; those revenues go to the seller not to Coca Cola. Coca Cola makes it sales as a wholesaler invoicing the seller given the terms stated by Coca Cola, which creates their accounts receivables. (I looked long and hard for and documentation on terms, but did not find any) Let’s assume that they are net 30 and given that there turnover was 9.90 this would justify those numbers and are in line for Coca-Cola.Wal-Mart sells directly to the consumer there for the sales revenue is from the consumer. There receivables are from a very different venue. As stated by the 2006 report from Wal-Mart, “Receivables Accounts: receivable consist primarily of receivables from insurance companies resulting from our pharmacy sales, receivables from suppliers for marketing or incentive programs, receivables from real estate transactions and receivables from property insurance claims. Additionally, amounts due from banks for customer credit card, debit card and EBT transactions that take in excess of seven days to process are classified as accounts receivable.” http://walmartstores.com/Media/Investors/2006_annual_report.pdf p.36

I am sure part of the High turnover or Wal-Mart has two factors. I would like to note that I was very surprised to see this high turnover rate of 142.76 at first, but when I looked more closely it made perfect sense. Give that we use the net sales for the computation, Wal-Mart’s net sales is much higher than Coca-Cola net sales, but both of their A/R values were similar, that would be one reason that Wal-Mart’s turnover rate would be higher. The second reason I would think is because there A/R consists of insurance billing. With the electronic infrastructure of the insurance billing today it happens very quickly once it is submitted to the insurance company. It is all electronic from the submittal, to the response, and finally to the money being directly deposited into Wal-Mart’s bank account. This would create a rapid turnover in A/R .In conclusion I would have to say that yes, both companies in all their differences as companies are reasonable in their ratios of turnovers.

http://www.thecocacolacompany.com/investors/pdfs/form_10K_2006.pdfhttp://walmartstores.com/Media/Investors/2006_annual_report.pdfWarren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.