Problem Six: Wal*Mart
Refer to Wal*Mart's financial statements, below. $Problem Six: Wal*Mart Refer to Wal*Mart's financial statements, below. \begin{array}{|l|r|r|} \hline\text{Shareholders' Equity}&&\\ \hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\\ \hline\text{Common stock ( \$ .10 par value; 5,500 shares}&&\\ \text{authorized. 2,285 and 2,293 issued and outstanding in}&&\\ \hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \\ \hline \text { Capital in excess of par value } & 547 & 545 \\ \hline \text { Retained earnings } & 16,768 & 14,394 \\ \hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \\ \hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \\ \hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \\ \hline \end{array} a. Calculate: total debt/equity ratio and times interest earned ratio for fiscal X6 and X7. Comment on your results. b. Analysis of Wal*Mart's footnotes reveals the existence of significant operating leases. Explain whether this would change your answer in part a) and how you would make the changes.$
$Problem Six: Wal*Mart Refer to Wal*Mart's financial statements, below. \begin{array}{|l|r|r|} \hline\text{Shareholders' Equity}&&\\ \hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\\ \hline\text{Common stock ( \$ .10 par value; 5,500 shares}&&\\ \text{authorized. 2,285 and 2,293 issued and outstanding in}&&\\ \hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \\ \hline \text { Capital in excess of par value } & 547 & 545 \\ \hline \text { Retained earnings } & 16,768 & 14,394 \\ \hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \\ \hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \\ \hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \\ \hline \end{array} a. Calculate: total debt/equity ratio and times interest earned ratio for fiscal X6 and X7. Comment on your results. b. Analysis of Wal*Mart's footnotes reveals the existence of significant operating leases. Explain whether this would change your answer in part a) and how you would make the changes.$

\begin{array}{|l|r|r|}\hline\text{Shareholders' Equity}&&\\\hline\text{Preferred stock ( \$.10 par value: 100 share authorized, none issued)}&&\\\hline\text{Common stock ( \( \$ .10 \) par value; 5,500 shares}&&\\\text{authorized. 2,285 and 2,293 issued and outstanding in}&&\\\hline 1997 \text { and } 1996, \text { respectively) } & 228 & 229 \\\hline \text { Capital in excess of par value } & 547 & 545 \\\hline \text { Retained earnings } & 16,768 & 14,394 \\\hline \text { Foreign currency translation adjustment } & {(400)}&{(412)} \\\hline \text { Total shareholders' equity } & \underline{17,143} & 14,756 \\\hline \text { Total liabilities and shareholders' equity } & \$ 39,604 & \$ 37,541 \\\hline\end{array}

a. Calculate: total debt/equity ratio and times interest earned ratio for fiscal X6 and X7. Comment on your results.
b. Analysis of Wal*Mart's footnotes reveals the existence of significant operating leases. Explain whether this would change your answer in part a) and how you would make the changes.

A Company Wishes to Increase Its Financial Leverage

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