Finance Report: Stock Valuation and Company Performance Analysis

This finance report analyzes stock valuation models, company performance, and legal rights. It begins by outlining the legal rights of stockholders, board of directors, and auditors. The report then identifies and explains various stock valuation models used to estimate intrinsic value, such as the dividend discount model and discounted cash flow model. The core of the report involves a time-series analysis of Walmart and Toyota, examining their ownership structures and financial performances. The analysis includes revenue, net income, and liquidity trends. The report concludes with findings, recommendations, and an investment decision based on the comparative analysis of the two companies, providing insights into their financial health and investment potential.

Running Head: FINANCE
FINANCE
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to Question 1.................................................................................................................2
Legal Rights of Stockholders.................................................................................................2
Legal Rights of Board of Directors........................................................................................2
Legal Rights of Auditors........................................................................................................2
Answer to Question 2.................................................................................................................3
Stock valuations Models for Estimating Intrinsic Value of Stock.........................................3
Answer to Question 3.................................................................................................................4
Ownership Structures and Performance of Walmart.............................................................4
Ownership Structures and Performance of Toyoto................................................................5
Answer to Question 4.................................................................................................................5
Findings and Recommendations............................................................................................5
Reference....................................................................................................................................7

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Answer to Question 1
Legal Rights of Stockholders
The rights of the stockholders includes rights of share in the profitability of the
company, assets and income as well as degree of influence over the management selection of
the company, general meeting voting rights and preemptive rights for the new issued shares
(Laster and Zeberkiewicz 2014). Hence, it includes following:
 The Rights to Share in the Profitability.
 The Right for influencing management.
 The Rights for buying new shares.
 The Rights for voting.
Legal Rights of Board of Directors
The rights of the directors are categorized into the individual as well as collective
rights. The individual right includes rights for inspecting books of accounts, rights for
receiving notices for the board meetings, rights for inspecting minutes of the meetings of
board and rights for participating in casting of vote in against or favor of the resolutions (Wu,
Chen and Lee 2016).
Collective rights includes following:
 Rights for refusing to transfer the shares.
 Rights for electing the Chairman.
 Rights for appointing the managing director.
 Rights for recommending dividend.
Legal Rights of Auditors
 Rights or accessing the books and the records of the organization.

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 Rights for getting explanations from the employees of the company.
 Rights for receiving notices for the general meetings.
 Rights for visiting branches.
 Rights for seeking legal and technical advice.
 Rights for claiming the remuneration.
 Rights for refusing for commencing the audit.
 Rights for questioning the board.
 Rights for qualifying his report.
 Rights for indemnity (Egels-Zandén and Merk 2014).
Answer to Question 2
Stock valuations Models for Estimating Intrinsic Value of Stock
Stock valuation is the method of determination and estimating the intrinsic value of
the stock. The benefits of the valuation of stock evolve from fact that stock’s intrinsic value is
not attached with their current prices. This valuation will help the investors in knowing and
determining that whether stocks at the current price of market is under-valued or over-valued
(De Cesari and Huang-Meier 2015). The popular models of stock valuations for estimation of
intrinsic value of stock includes following:
 Dividend Discount Model: This model is one of the most basic models as it is based
on the assumption that dividend of the company represents cash flows of the company
to their shareholders.
 Discounted Cash Flow Model: This is the method of absolute stock valuation. Under
this approach, the stock’s intrinsic value is calculated with the help of discounting of
the free cash flows to the present value of the company (Jordan, Miller and Dolvin
2015).

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 Comparable Companies Analysis: This approach of valuation aims for deriving the
theoretical price of the stock by using the similar companies price multiples as
compare to using the fundamentals of the company for estimating intrinsic value of
stock (Edeki, Ugbebor and Owoloko 2016).
Answer to Question 3
Ownership Structures and Performance of Walmart
Ownership Structures
 Institutional Structure: The ownership of the institutions is 30.15% of the company.
This ownership enables the company for facing volatility of the movements of the
stock prices, in case if the institution executes the block trades in open market.
 General Public Ownership: The general public holds 18.49% of stake in the
company, that makes this company most popular stock among the retail investors.
 Private Company Ownership: The private companies hold the stake of 50.40%.
These parties generally invest because of their strategic interest as well as reaping
capital gains on their shareholding and investments (S2.q4cdn.com, 2019).
Performance of Walmart
The trend of the company shows that the revenue of the company is increasing every
year from 2016-2017, there was increase of 0.77 and in the year 2017-2018, the revenue
grows by 2.89%. However, the net income of the company has been decreased over the years
because of the investments in the fixed assets; this will give return in following years. The
liquidity position of the company is also not enough in meeting the short-term liabilities.
Therefore, the company is not performing well in following years. The shares prices of the
company have also decreased over the years. Moreover, the shares price of the company is
having good trend over the years (S2.q4cdn.com, 2019).

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Ownership Structures and Performance of Toyoto
Ownership Structures
 The financial institution is holding 34% of the total shares of Toyoto.
 The individuals are holding 23% of the total stock.
 Other corporate entities are holding 20.97 of the shares of the company.
 Lastly, the foreign corporate entities and other are holding 22.03% of the total shares
of the company (Toyota-global.com, 2019).
Performance of Toyota
The revenue of the company from the year 2016-2017 was in negative -2.92% and the
in the year 2017-2018, it was 6.06%, it means the company has improved its revenue during
the years. The company incurred heavy loss in the year 2017 as compare to the year 2017 by
-43.10% but in 2017-2018, the company’s net profit has increased to 16.89%. The liquid
assets of the company during 2016-2017 were -0.33% and during 2017-2018 was 1.84, which
is the good sign of improvement. The ROE of the company has grown in the year 2018 by
13.7 and ROA has increased to 5, which means the company is performing well (Toyota-
global.com, 2019).
Answer to Question 4
Findings and Recommendations
As per the findings, in comparison with the Walmart, Toyota is better option for the
investments, it is because, the trend of Toyota shows that the financial position of the
company in terms of its profitability, liquidity and solvency is increasing over the years.
However, in case of Walmart, its profitability, liquidity and the solvency position is not up to
the mark. The company must try to reduce its expenses for increasing the profitability and a
part from this company should also make expenses in R&D for improving the present process

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and make new development, which would be beneficial for the long-term performance of the
company.

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Reference
S2.q4cdn.com. (2019). [online] Available at:
https://s2.q4cdn.com/056532643/files/doc_financials/2018/annual/WMT-2018_Annual-
Report.pdf [Accessed 15 May 2019].
Toyota-global.com. (2019). [online] Available at:
https://www.toyota-global.com/pages/contents/investors/ir_library/annual/pdf/2018/
annual_report_2018_fie.pdf [Accessed 15 May 2019].
Laster, J.T. and Zeberkiewicz, J.M., 2014. The rights and duties of blockholder
directors. Bus. Law., 70, p.33.
Wu, S., Chen, C.M. and Lee, P.C., 2016. Independent directors and earnings management:
The moderating effects of controlling shareholders and the divergence of cash-flow and
control rights. The North American Journal of Economics and Finance, 35, pp.153-165.
Egels-Zandén, N. and Merk, J., 2014. Private regulation and trade union rights: Why codes of
conduct have limited impact on trade union rights. Journal of Business Ethics, 123(3),
pp.461-473.
Jordan, B.D., Miller, T.W. and Dolvin, S.D., 2015. Fundamentals of investments: valuation
and management. McGraw-Hill Education.
Edeki, S.O., Ugbebor, O.O. and Owoloko, E.A., 2016. He’s polynomials for analytical
solutions of the Black-Scholes pricing model for stock option valuation.
De Cesari, A. and Huang-Meier, W., 2015. Dividend changes and stock price
informativeness. Journal of Corporate Finance, 35, pp.1-17.