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Question 17.7: In its 10-K for the year ended 31 January 2007, Wal-Mart’s (...

In its 10-K for the year ended 31 January 2007, Wal-Mart’s (NYSE: WMT) balance sheet included total obligations under capital leases of $3,798 million, of which $285 million was due within one year and the remainder was long term. The notes to the financial statements also broke out the following information regarding long-term contractual obligations:

Contractual Obligations and Other Commercial Commitments

The following table sets forth certain information concerning our obligations and commitments to make contractual future payments, such as debt and lease agreements, and contingent commitments:

Based on the information given, address the following problems:
1. Contrast the relative importance of on- and off-balance-sheet treatment of contractual obligations for Wal-Mart.
2. Determine the relative importance of Wal-Mart’s off-balance-sheet obligations, given that Wal-Mart’s 2007 cost of sales was $264 billion.
3. Estimate the impact on Wal-Mart’s financial statements if operating leases were treated as though they were capital leases.


Payments due during fiscal years ending 31 January
($ millions) Total 2008 2009–2010 2011–2012 Thereafter
Recorded Contractual
Long-term debt $32,650 $5,428 $9,120 $5,398 $12,704
Commercial paper 2,570 2,570 __ __ __
Capital lease obligations 5,715 538 1,060 985 3,132
Unrecorded Contractual
Noncancelable operating leases 10,446 842 1,594 1,332 6,678
Interest on long-term debt 17,626 1,479 2,482 1,705 11,960
Undrawn lines of credit 6,890 3,390 __ 3,500 __
Trade letters of credit 2,986 2,986 __ __ __
Standby letters of credit 2,247 2,247 __ __ __
Purchase obligations 15,168 11,252 3,567 126 223
Total commercial commitments $96,298 $30,732 $17,823 $13,046 $34,697
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