1

Flexible Budget Lester M. Legette Trident University International

ACC501- Accounting for Decision Making Dr. Ralph Wayne Ezelle 05 March 2012

What is the growth rate in sales for the past three years? For this SLP a Break-Even Analysis, and a Flexible budget is required. I will be using Wal-Mart, time period from 2009-2011 to prepare a flexible budget for FY 2012. The information for this SLP will come from the consolidated Statements of income for annual reports of Wal-Mart. Wal-Mart rules the Fortune 500 for the second year in a row and the eighth time this decade -- beating all its competition to be crowned America's largest company. But things haven't been easy: Sales at its U.S. stores have dropped for seven straight quarters, despite gains in worldwide revenues and profits. Net sales for the fiscal year 2010 were $405.0 billion, an increase of 1.0 percent over fiscal year 2009. Net sales for the fiscal year 2010 were $418 billion, an increase of 3.4 percent over fiscal year 2010. Wal-Mart has seen some substantial growth over the last three years despite the failing economy. Wal-Mart has forecasted sales growth between 5 and 7 percent for fiscal year 2013. The formula for Growth rates is PR = (V present V Past) X 100 V Past What is the current growth rate in the economy? At close of day March 01, 2012 US GDP Growth was 2.97 Global Stocks Growth was 0.50. US Unemployment is still high at 8.30 (forecast.org, 2012). The US economy has see some rough times with falling job counts, sluggish GDP growth, uncertain incomes, rising oil and food prices, subprime mortgage woes, and wobbly financial markets. Despite all of the troubled days the economy has seen with a $14 trillion behemoth, the economy is doing quite well, and long-term trends seem to show positive numbers. (Cox, 2008) (405.0 418.0) X 100 418.0 = 3.4

How are the competitors doing? With the recession forcing many stores into bankruptcy, Wal-mart is now looking to take out the remaining survivors. One of Wal-Marts toughest competition is Target. Through discipline execution across the company, net earnings grew to $2.9 billion 17.3 percent above 2009. As Target takes initiatives to drive sales and gain share in existing markets they are trying to grow the guest base and enter new markets through a dynamic growth portfolio. Target is focused on growing their business by investing in existing stores, adding new locations, and developing new store formats by expanding beyond the United States. Although Target is not as big as its competitor Wal-mart, its obvious that they are not going anywhere anytime soon. Current interest rates and tax burdens In 2010 Forbes took a look at the annual reports of the 20 most profitable U.S. companies. Some of the results may surprise you. The average income tax rate within the group was 25.4% Americas three biggest oil companies. All Fortune 500 companies endure some kind of income tax burdens of more than 40%--higher than the statutory U.S. rate of 35%. Exxon, with a 45% rate, tallied $21.6 billion in worldwide income taxes for 2010. Wal-Mart Stores paid $7.1 billion (at a rate of 32.4%) in income taxes in 2010. What did you learn; and I learned that budgeting is an important internal activity, and that you can make a budget for any and all of the financial statements. I also learned that budgets can provide the basis for detailed sales targets, staffing plans, inventory production, and cash investment/borrowing.

Budgets allow managers to provide forward-looking guidance to investors and creditors. Budgets are necessary to convince banks and other lenders to extend certain lines of credit. How can you use this information as a manger? As a manager Budgets provide a method of planning the use of resources, A vehicle for forecasting, a means of controlling the activities of various groups within the firm, a means of motivating individuals to achieve performance levels agreed and set a means of communicating the wishes and aspirations of senior management a means of resolving conflicts of interest between groups with the organization. The budget provides the planning of the organization in a systematic and logical manner that adheres to the long term strategy. (Tutor2u.net, n. d.)

References

Financial Forecast Center TM. (n.d.) U.S. Gross Domestic Product GDP Forecast. Retrieved 02 March 2012 from http://forecasts.org/gdp.htm

United State GDP Growth Rate (n. d.) Retrieved on 02 March 2012 from http://www.tradingeconomics.com/united-states/gdp-growth Gregory, S. (2009). Walmarts Latest move to Crush the Competition, TIME Retrieved on 02 March 2012 from www.time.com Cox M., Alm R. The American. Retrieved on 02 March 2012 from www.american.com