The company that has been selected for the assignment is Walmart. One of the things that I would like to change in the company is increasing their inventory. Secondly, I would like to adjust their sales by reducing the expenses and increasing units presented to the market for selling. There are several implications expected in the financial reports for Walmart if the two changes are initiated. Some of the implications will be felt now, while others are likely to occur in the future. For example, when there is an increase in inventory, it is expected that the cash outflow will be on the rise (Accounting Tools, 2014). Walmart will have bought more goods than they can sell. There will be an increase in the liquidity ratio of the organization. More so, the balance sheet is likely not to have a cash balance. Therefore, the cost of goods sold will decline while expenses increase in the books of accounts. In addition, reducing expenses will increase the assets turnover ratio. The company will be holding more money than releasing for purchases. While the marginal propensity to consume will decline, it is anticipated that the credit will decline during the debit increase. There will be no stalemate on the balance sheet.
Two of the financial reports related to the proposed changes include the balance sheet and trial balance. A balance sheet provides information on the fiscal balances in a company. If there is an increase in the inventory, using a balance sheet in decision-making will be inappropriate (Accounting Tools, 2014). It will not be appropriate to decide on expanding the line of credit if there is no equality between the debit and credit figures. Therefore, a decision on whether or not to remain in business will not be effective. The trial balance will be affected by an adjustment on the expenses. Critical decisions made from the book of account appertain to investors and stakeholders. However, the change will affect the decision since it will not be possible to know the credibility of investing in the company. It will be challenging to decide if the stakeholders will reap huge gains at the end of the financial period. The liquidity of the business decision will equally be at stake (Yusuf and Jordan, 2015). At the end of the financial year, the balances will inform the lenders and creditors of the action. Therefore, bankruptcy decisions will equally be negatively impacted.
One of the processes not directly related to accounting is the demand for goods and services in the market. However, the process will affect the first change appertaining to increasing inventory because the materials used in the production processes are incorporated. If there is a shortage in demand, it will be challenging to increase the inventory in the company and still obtain the anticipated outcomes. Another process is Walmart’s marketing and promotion to gain the needed market shares. A change concerning a decrease in expenses will be affected based on the organization’s marketing approach (Yusuf and Jordan, 2015). The end goals will increase sales using the campaign and lower the cost of goods sold. In the process, it will be easy to indirectly decline the cost affecting accounting activities in the company. Therefore, all the activities and operations that revolve around the presentation of the product to the consumer will indirectly affect accounting and have implications for the two proposed changes.
References
Accounting Tools. (2014). Debt to Equity Ratio.
http://www.accountingtools.com/debt-to-equity-ratio.
Yusuf, J. & Jordan, M. (2015). Popular Financial Reports: Tools for Transparency, Accountability and Citizen Engagement. School of Public Service Faculty Publications. 14.
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