Corporate Finance Analysis Project Report: Campbell Soup Company

This project report presents a comprehensive corporate finance analysis of Campbell Soup Company. It begins with a stockholder analysis, identifying the primary and marginal investors in the company and examining their investment motivations. The report then assesses the company's risk profile, calculating both systematic and unsystematic risks, and evaluating its risk-return relationship. It examines the company's long-term projects and their impact on cash flow and profitability. The analysis further explores Campbell's capital structure, comparing its debt-equity ratio to industry standards and recommending adjustments to optimize it. The report also evaluates the company's dividend policy, assessing its payout ratio and making recommendations. Finally, the report concludes with a valuation of the company, considering its current market value and future growth prospects, based on the analysis of the financials of the company. The analysis uses Bloomberg, Yahoo Finance and annual reports to support the findings and recommendations.

Running Head: Corporate Finance Analysis
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Project Report: Corporate financial analysis

Corporate Finance Analysis
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Contents
Introduction.......................................................................................................................3
Stockholder analysis.........................................................................................................3
Risk and return..................................................................................................................3
Measuring investment returns...........................................................................................4
Capital structure choices...................................................................................................4
Optimal capital structure...................................................................................................5
Mechanics of moving to the optimal................................................................................5
Dividend policy................................................................................................................5
A framework for analyzing dividends..............................................................................6
Valuation...........................................................................................................................6
References.........................................................................................................................7

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Introduction:
It is a financial accounting part that is mainly used by the financial managers or the
investors of the company to evaluate about the internal functions of the company such as
dividend structure, company’s stockholder, valuation and risk and linked return along with
the stock of the business. The report focuses on Campbell Soup Company. various internal
financial activities and external financial activities of Campbell Soup Company has been
measured in the report to know whether the company is managing the activities and the
performances related to finance at better level. If further focuses that investment in the
company will be a good option or not. Bloomberg, yahoo finance etc online sources have
been taken into consideration to conduct the research.
Stockholder analysis:
Management style and management position of company has been done under the
Stockholder analysis. Through study over the investors of the company and annual report, it
has been found individuals are the main stakeholders in the business. The common man
(individuals) have made invested in stock of the company to get the higher return as well as
reduce the tax burden. Along with that, investors who have made their maximum contribution
in capital of a company are recognized as marginal contributors of the company. On the basis
of annual report (2018), it has been found that highest contribution has been made by few big
businesses in the company in order to earn additional penny and diverse the business in the
market. Further, it has been studied that each marginal investors are diversified investors in
the company. Further, a good dividend payout ratio of the business is assisting the business to
preserve the market cap.
Risk and return:
In addition, the risk and return level of Campbell Soup Company has been calculated
to identify the investment level in the company. Bloomberg (2019) depicts that the
unsystematic risk is 0.013 and the systematic risk is 0.33 of the company. the study of risk in
the company explains that the risk of the company is high because of the industry and the
currency changes. However, the risk level of the company is not that much higher. In the
industry and market; firm is doing better as well as the currency of the country is also
performing well which would help the business to maintain the risk level.

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Further the study over the risk profile explains that the associated risk would be lower
of the company and this will lead to the better investment performance. If an investor will
like to invest into company’s stock than 4.87% would be the total return from the stock of the
company to the investors. Stock price of the company is lower in the market than the actual
stock price which explains that the stock price of the company is under performed. Better
policies of the management are the main reason behind the improvement in the performance
and it helps the company to congregate the objectives and goals (Elton, Gruber, Brown and
Goetzmann, 2009).
Measuring investment returns:
On the basis of the study over annual report (2018) and the home (2019), it has been
found that the company is working on various long projects for diverse goals. Company’s
main long term project is running by the different teams of the company. It has been found
that the major project of Campbell contains U. S. Warehouse optimization project, ongoing
refrigeration system replacement projects (Annual report, 2018). As well as, transition of
production of the Toronto manufacturing facility to our U.S. thermal plants is also one of the
major projects of the company. The company’s projects define that all the projects will offer
great cash inflows as well as huge profits to the company in long time. Equity and debt
sources have been used by the company to raise the funds for these projects.
Currently, all the projects of the company are operating well and these projects have
assisted the company to improve the cash flow and profitability position in the business.
Company’s market share has also improved due to the better projects. However, company’s
current projects are way better than the old projects due to the fact that the new projects are
associated with the advanced technology as well as R&D department has researched alot on
new projects. To conclude, the future performance would be better because of the projects
and huge investment (Brealey, Myers and Marcus, 2007).
Capital structure choices:
Different sources are consisted in the capital structure which helps a company to
improve the funds in order to do the daily operations or the further investment. In case of
Campbell Soup Company, the company has used preference share, equity shares, short and
long term debt in order to elevate the capital in the business. Company’s debt and equity ratio
is 0.113:0.996 (Yahoo finance, 2019). It explains that the equity funds of the company are

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quite less. It is not even 2% of business’s total debt. Further, the study over the last year’s
debt and equity explain that the company’s equity has been reduced as well as the debt has
been improved from 2017 in current year (Madura, 2014).
Further, in case of qualitative or quantitative term, Debt funds have many pros and
cons. Firstly, the Debt funds assist the business to reduce the responsibilities as well as it
makes less ownership shares. It also reduces total cost of capital. In addition, higher debt
level assists the company to mitigate risk level. Furthermore, higher debt level’s cons are also
there such as the increment in the liability. Annual report (2018) of Campbell Soup Company
explains that the company has huge debt that should be lowered down by the business to
administer the optimal level.
Optimal capital structure:
It is a position where the different sources of funds of the company are maintained
such as debt and equity. It is the position of debt and equity which talks about the cost of
capital and risk of the business. The optimal capital structure maintains the sources of fund at
such a level that risk and cost should be at their minimum. A study explains that the debt and
equity on the basis of industry and market must be 2:1 in the company. This ratio would
assist the business to mitigate the risk level along with that deduction in the cost of capital
(Bradford, Chen and Zhu, 2013).
If the company’s debt ratio is compared to the market’s debt ratio then the debt ratio
of Campbell is worst due to the fact that the current debt level is 98.99% of the company
from the total capital. Moreover, in expressions of industry, the debt level and optimal
structure level is not good which requires for the business to make the changes in optimal
level in order to administer the performance, cost and risk.
Mechanics of moving to the optimal:
Further, Campbell’s debt ratio is diverse than the suggested debt ratio which leads to
the conclusion that the business must mitigate the debt funds as well as business should
develop the funds of the equity so that the company’s debt ratio could be managed. The
business is suggested to make it in current time only otherwise the investor’s level and
market capital of the company would be hampered (Baker and Nofsinger, 2010). The
company also has a choice to revise the mix of debt and equity on the basis of retiring the

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debt. Company is suggested to use long term financing. Further, the business is required to
keep the currency in US $. .
Dividend policy:
Company’s dividend learning explains that the Campbell is paying a good dividend
amount to its investors. No shares have been buy back by the company. Further, the business
is paying the investors in order to impress them. Characteristics and performance of the
company explains that company should pay dividend only right now.
A framework for analyzing dividends:
US $ 107 million has been paid by the company as dividend to its stockholders. This
amount is 41% of total net profit of Campbell (annual report, 2018). 41% indicates that more
amounts could also be paid by the company to its stockholders but the current payout is also
better in comparison of the industry. Dividend policy of the company in the market and in the
industry is better and company is suggested to not to make any changes in the dividend policy
(Bloomberg, 2019). Company is currently making its focus on retaining few funds in order to
invest in any future projects.
Valuation:
Currently, the new projects are leading to the company towards better performance.
The operating income of the company will be higher in next few years. However, if to talk
about next 2 years, company’s operating income would not be increased much. Company
would at least take 2 years to reach over stable growth. Currently, the company’s equity has
estimated value of $ 34.49 each share in the market however the $ 0.35 is the book share
price (yahoo finance, 2019). It leads to the conclusion that company’s market worth is quite
better than business’s book value.

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References:
Annual Report. 2018. Campbell Soup company. [online]. Accessed from:
https://www.campbellsoupcompany.com/media-library/2018-annual-report/ (available on
31/12/2019).
Baker, H.K. and Nofsinger, J.R. 2010. Behavioral Finance: Investors, Corporations, and
Markets. John Wiley & Sons.
Bradford, W., Chen, C. and Zhu, S., 2013. Cash dividend policy, corporate pyramids, and
ownership structure: Evidence from China. International Review of Economics &
Finance, 27, pp.445-464.
Bloomberg. 2019. Campbell Soup company. [online]. Accessed from:
https://www.bloomberg.com/quote/CPB:US (available on 31/12/2019).
Brealey, R., Myers, S.C. and Marcus, A.J., 2007. FundamentalsofCorporate Finance. Mc
Graw Hill, New York.
Elton, E.J., Gruber, M.J., Brown, S.J., and Goetzmann, W.N. 2009. Modern Portfolio Theory
and Investment Analysis. John Wiley & Sons.
Home. 2019. Campbell Soup company. [online]. Accessed from:
https://www.campbellsoupcompany.com/ (available on 31/12/2019).
Madura, J., 2014. Financial markets and institutions. Nelson Education, p.p. 127-135.
Yahoo Finance. 2019. Campbell Soup company. [online]. Accessed from:
https://finance.yahoo.com/quote/CPB/ (available on 31/12/2019).