Question

For the year ending January 31, 2018, Walmart reported having made sales to its customers (net of returns and allowances) of $495,761,000,000. James Forrest is studying the available information in order to decide whether to buy ownership shares of Walmart on the New York Stock Exchange at the current price. Which of the following statements is true about the figure reported as the company's net sales?

a. Walmart made net sales during these twelve months of exactly $495,761,000,000.
The $495,761,000,000 is accurate, although the number has been rounded to the nearest
million.
Net sales were probably not $495,761,000,000 for the year, but that figure is close enough to be a fair presentation, one that Forrest can rely on in making his decision.
If this net sales figure had not been correct, Walmart's accountants would not have allowed the company to report the amount.

Answer 1

Stock investors receive a return from dividends or capital gains. Net profit from a stock transaction is calculated by subtracting the initial investment and transaction fees from the sale amount of the stock. Corporate financial statements like Walmart's net sales may be rounded but are considered a fair representation for investment decisions.

Step-by-step explanation:

When investors purchase shares of stock, they are typically looking for some form of return on their investment. This return can come through dividends, which are direct payments from the firm to the shareholders, or through capital gains, which occur when the value of the stock increases from the purchase price to the sale price.

For example, if an investor bought 1000 shares of Nike at $24.50 per share and later sold them at $39.75 per share, the profit before transaction fees would be calculated as follows:

Initial Investment = 1000 shares * $24.50/share = $24,500

Sale Amount = 1000 shares * $39.75/share = $39,750

Profit before fees = Sale Amount - Initial Investment = $39,750 - $24,500 = $15,250

Transaction fees (buying + selling) = $9.99 + $9.99 = $19.98

Net profit = Profit before fees - Transaction fees = $15,250 - $19.98 = $15,230.02

This same process is applied to other stocks, like Panda Express and Walmart, to determine the net profit from each stock transaction. The investor must always consider the transaction costs when calculating the actual profit from their investment deals.

When evaluating Walmart's reported net sales of $495,761,000,000, it's important to recognize that large corporations often round their reported figures.

Therefore, while the net sales figure is not likely to be exact to the dollar, it should be considered a fair representation for investment decisions. Accountants review and confirm such figures to ensure they meet financial reporting standards before a company reports them.