Walmart Analysis: Financial Performance, Dividend & Capital Structure

This case study provides a comprehensive analysis of Walmart, a multinational retail corporation, focusing on key factors influencing its growth and performance. It examines the impact of issues like Brexit and COVID-19 on the company's revenue generation, supply chain, and overall financial stability. The report delves into Walmart's dividend policy, exploring dividend irrelevance and relevance theories, and analyzes its capital structure through relevant theories, including the traditional approach. Furthermore, the study includes a financial analysis using ratio evaluations to assess Walmart's liquidity condition within the retail sector, providing insights into its internal practices and external influences on its success.

COMPANY ANALYSIS

TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................2
MAIN BODY..................................................................................................................................2
Analysing issues of company......................................................................................................2
Explaining dividend policy.........................................................................................................4
Explaining capital structure theories...........................................................................................4
Financial analysis is as follows:..................................................................................................6
CONCLUSION...............................................................................................................................7
APPENDIX A.................................................................................................................................8
Walmart’s financial statement....................................................................................................8
APPENDIX B...............................................................................................................................10
Ratio Calculation.......................................................................................................................10
REFERENCES..............................................................................................................................12
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INTRODUCTION
Company analysis is the procedure of evaluating crucial factors that affects the growth and
processing of an organization through focusing on product, profile, profitability, etc. In
current era, it becomes important for the company to assess its factors that boost and hinder
performance of firm. The current report is based on Walmart which is multinational
cooperation that operates in retail industry. It is basically having supermarket chain that
deals in groceries products, general merchandising, etc. firm was founded in 1962 and has
club retail warehouses which is one of the reason that firm is one of the largest retail
revenue generating company in world. Operating activity of company is implemented by
three segments such as Walmart US, international and Sam’s club. Organization has good
marketing and sales efforts that re contributing in achieving good market share in industry.
This company has competitive advantages such as trust among targeted audience which is
attained by offering qualitative products.
Walmart is listed on New York stock Exchange that is one of the most profit making
organization in USA. This is an internal organization that operates on several platform
which require it to analyse all impacting factor so that crucial improvements can be exerted.
Firm has certain issues like improper formulation of policies, lack of implementation of
employment law, etc. In addition to this, it becomes necessary for the enterprise to have
knowledge of its internal as well external aspect influencing success determining
components. Present case study will comprise issue prevailing in firm to make appropriate
determination of impact on firm’s growth. Current report will focus on dividend policy,
capital structure to get deeper know ledge of Walmart internal practices. Case study will
involve financial analysis via conducting ratio evaluation to obtain better understanding of
Walmart liquidity condition in sector.
MAIN BODY
Analysing issues of company
There are several issues that impact an organization’s [processing so that suitable course of
action can be taken into account. Walmart as being international organization required to be
identify those challenges that are uncontrollable and needs instant action for reducing
adverse impact. From the evaluation it can be interpreted that Brexit and Covid 19 are two
most crucial issues influencing firm’s revenue generating capacity.
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i) Brexit
It is one of the major issue that affected Walmart on large scale through declining the
ability to sustain in industry. This is important to address to analyse its longer run impact on
firm’s way of processing (Pelcher, 2019). There are variety of aspects that has occurred due
to implementation of Brexit which includes reducing purchasing power of customers,
creating scenario for making firm to struggle, etc. In order to get efficient amount of fund
through sales become difficult for organization due to lack of purchasing power of buyers.
From the assessment it can be interpreted that due to Brexit continuous loom uncertain
market surrounding has been created. It all has influenced stability of company in negative
manner. There is requirement to give emphasis on consumer ‘s confidence level is found to
be six level low due to national against supporting events. Outcome derived was
comparatively less that affected financial performance of Walmart due to lower prices,
profit margin, sales, etc. on the basis of this, it can be articulated that Brexit has negatively
affected financial condition of company.
ii) Covid 19
In the present scenario it is essential to address the pandemic crises which is affecting the
all industry procedure. This has impacted both positively and negatively depending upon
the segment of industry. Walmart as operating in retail industry as international operator got
influenced from the covid 19 crises. It is identified that Walmart has large supply chain
through building good relationship with its suppliers and vendors. It has ensured that all
precaution regarding pandemic for getting smooth functioning are executed. For global
practices enterprise has been in close touch with private brand suppliers to overcome
challenges arriving in path of organization in turn fluent supply chain can be maintained.
Firm operates in retail industry and offers grocery products which are counted in essential
requirement of customers and allowed to deal with clients in the times of crises. It has
enabled Walmart to get the opportunity to increase revenue generating ability by making
higher conversion rate (Hasnawati, 2021). For the purpose of positively cooperating with
changing circumstances firms has given emphasis on following all related rules and
regulation to enhance present financial condition in industry. Walmart’s sales activity has
inclined s compared to previous so it can be interpreted that firm has positively got impacted
from these activities. There is some part of distribution found in covid 19 time which
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cannot be neglected while addressing this particular issue. Cost structure has become
complex to certain extent due to compliance with prevailing rules and regulations. This is
influencing adversely by declin certain range of profitability and sustainability.
Explaining dividend policy
Dividend irrelevant theory (M&M)
This is associated with there should not have little to no influence on stock prices due to
company’s declaration & payment of dividend. it basically articulates that there is no value
addition of dividend to inventors and ultimately affects the financial health of organization.
Walmart can influence its positive financial wellbeing by issuing dividend to its inventors
(Bajaj, Kashiramka and Singh, 2020). There is involvement of not tax dividend policy is
irrelevant theory as inventors expected to create their own cash flows which affects company’s
monetary health. It comprises assumption like no tax, floatation cost, impact of capital
budgeting, etc.
For instance- all equity of firm with 100 shares outstanding, investors require 10% return and
expected cash flow is 10000 and plan to dissolve is 2 years. In such case pay out dividends of
10000 per year is 100 per share and paying 11000 this year. Raising other 1000 by issuing stock
then paying an amount in year2 is enough to give 10% return.
Dividend relevance theory
It articulates that dividend decision affect market value of organization. In addition to
this, it is important for specified organization to consider the dividend policy as important aspect
which influences its market worth (Dividend theories, 2021). This particular theory comprises
Walter, Gorden, dividend capitalization and signaling models. Tax preferences states that lower
rate of dividend payments should be there to maximize share prices. Walmart basically focuses
on this approach to get higher prices of shares.
Explaining capital structure theories
Relevant theory
This is one of the important theory that is concerned with systematic approach to
financing business activities through combination of equities and liabilities. The below shown
diagram is concerned with relevant theory of traditional approach states that an organization’s
value increases to certain extent of debt capital after which it tends to remain constant and brings
to decrease if there are more borrowings (Vogel, 2020). In addition to this, it depends on
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assumption that imply that cost of either debt or equity financing differ in respect to degree of
leverage (Narayan and et.al., 2021). From the below graph it can be understood that there is
moderate level of leverage when benefits of using debt are more than con of utilizing inclined
cost of equity.
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