The capital structure of the organization
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Explain the capital structure of the organization you have been studying this term. Do they rely more heavily on debt or equity? What are their structure weights (%’s)? How does this structure contribute to the overall risk of your firm? Do you feel they have chosen an ideal capital structure? What would you do to improve their structure if you could be CEO for a day?
Sample Solution
The capital structure of Walmart is composed primarily of equity, with the company relying more heavily on this factor than debt. According to their financial statements (Walmart 2020), Walmart has a total long-term debt of $47 billion while having a total shareholders’ equity of $76 billion. This results in an overall structure weighting of 61% equity and 39% debt which can be further broken down into the following categories: common stock at 44%, retained earnings at 15%, treasury stock at -6%, and other components making up 4%.
In terms of specific securities, Walmart’s common stock accounts for about 80% ($38 billion) out of its total long term debt ($47billion) due to its issuance back in 2015 when it raised roughly 8.5 billion from selling shares (Walmart 2020). The remaining 20% comes from various non-recourse notes that have been issued by the company since then such as asset backed securities or revolving credit facilities (Walmart 2020). Moreover, when combined these two elements make up most ($45.7billion) out their total long-term capitalization amounting to just over 95% with other items like preferred stocks filling any remaining space.
In conclusion, it appears clear why Walmart chooses to rely more heavily on equity rather than debt given their current financial situation – they are able to access additional funds quickly while still minimizing risk exposure associated with borrowing money through traditional means such as taking out loans or lines credit etc… This strategy should help them continue operations regardless economic conditions whilst still maintaining healthy profit margins going into future which ultimately benefits both shareholders and customers alike.