- So where did Walmart get the $204 billion
it needed to buy it assets?
That information is contained in the other part
of the balance sheet, liabilities and equity.
Walmart borrowed some of that money,
and some of the money was invested
by the owners, the shareholders.
So, let's take a look at the first item there,
short term borrowings, $5.257 billion.
Short term borrowings, do you know what that is?
Sure, you know what that is.
Walmart went to various banks and borrowed some money,
and said we'll pay you back soon short-term.
Accountants define short-term as less than a year,
so these are loans that Walmart's going to have
to pay back within a year.
The second item is accounts payable,
which is a little bit over $46 billion.
Now, what is accounts payable?
Well, when Walmart buys inventory from Procter & Gamble
or Black & Decker or whomever else,
they buy it, they have it shipped to their store,
they put it on their shelves so you and I can buy it,
but Walmart doesn't pay cash up front.
Walmart tells Procter & Gamble, listen, thanks,
ship it to our store, we'll pay you later,
30 days from now, 45 days from now.
So this accounts payable represents the amount
that Walmart owes to its suppliers
for inventory that Walmart has already received,
but hasn't paid for yet.
An interesting thing to do is to compare
a couple of numbers in this balance sheet.
Do you remember what Walmart's inventory was?
About $43 billion.
Accounts payable is about $46 billion,
meaning if you go into a Walmart store,
you stand right in the middle of the store
and just look around, you're going to see inventory.
Has Walmart already paid for most of that inventory?
No, in fact, because the accounts payable amount
is greater than the inventory amount,
Walmart has already sold some inventory
for which it has not yet paid for.
Most likely, when you pick something up
off a shelf at Walmart and put it in your cart
and go up to the front to buy it,
Walmart hasn't even paid for that thing yet.
It's an interesting way to do business.
It shows that Walmart is very credit-worthy.
Suppliers trust them.
Now, take a look down the list about half way.
You see long-term debt, $30 billion.
Well, what do you think that is?
Short-term borrowing was loans
Walmart has to pay back within one year.
What about long-term debt or long-term borrowing?
Yep, that's the amount that Walmart has to pay back
more than a year from now, five years from now,
seven years from now, 12 years from now.
So Walmart's long-term loans total $30 billion.
Now, keep going down the list to find
the largest single line item.
That amount is $85.107 billion.
What is that?
That's retained earnings.
Let's remind ourselves what retained earnings is.
That's the amount of profits that have been generated
by Walmart that have been kept in the business
and used to buy assets, when?
Since the beginning of Walmart.
So from July 1962, when Walmart first started,
until January 31, 2018, when these numbers were prepared,
Walmart's shareholders have authorized a company to keep
over $85 billion of profit in the business
to be used for expansion.
We see here retained earnings is the largest single source
of financing that Walmart has.
So, where did Walmart get the $204 billion
it needed to buy its assets?
Well, a lot of it came from retained earnings.
Some of it came from long-term debt.
A lot of it came from accounts payable.