What Makes Up a Wal-Mart U.S. Dollar?

Legendary fund manager Peter Lynch once said that you shouldn't invest in any idea you couldn't illustrate with a crayon.

Though I'm not much for crayons, I do love the pithiness of that line. We regularly preach the same idea at the Fool: Don't buy what you don't understand. And if you can't simply sketch out a company's business model -- how it actually makes money -- then maybe you shouldn't be investing in it.

Let's say you need to buy flip flops, charcoal, the latest DiCaprio epic, and shampoo all at the same time -- and want to make a questionable fashion statement while doing so -- where do you go? If you're like me, you go to Wal-Mart (NYSE: WMT  ) .Wal-Mart sells a ton of stuff, but where does it really make its money? Let's take a look at a simple visual to help answer that question. (Note: I'm focusing on revenues here, not earnings.)

Source: Wal-Mart 2011 10-K.

Think I missed something in this illustration? Have any general thoughts on this exercise? Let me know in the comments section below. And if you haven't already, be sure to follow our Wal-Mart news and commentary using the Fool's free My Watchlist tool.

Fool.com graphics/photo/art editor Dari FitzGerald doesn't own shares of Wal-Mart. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On May 27, 2012, at 11:43 AM, madmilker wrote:

    What makes up a union of states without any currency to make stuff?

    ["Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what's in the best interests, and we should make sure that trade is not only free, but fair too."]

    http://www.worldthinktank.net/pdfs/TheFlowofTrade.pdf

    Retail makes NOTHING....it only moves a countries currency.

    So, why is it that over 95% of the Chinese currency that goes into the front door in a Wal*Mart store in China stays in China....

    Maybe Peter Lynch will one day realize why.

    1975 was the last year America had a trade surplus.....DO THE MATH.

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