Financial Analysis: Costo v. Walmart
Discuss each company’s current management of working capital and current assets:
How does seasonality affect cash balances and inventory management?
Is the company managing and using its current assets well? Why, or why not?
What type of financing strategy does the company use?
How might free cash flow impact financing and investing decisions?
Assume the firm needs to raise a large amount of cash. Compare the choices of raising these funds in the capital market (selling new shares of stock) versus the bond market (debt financing), and make a decision as to what is best and why.
Consider the impact on the following on your choice:
The company’s existing capital structure
The company’s current market capitalization
The company’s weighted average weighted average cost of capital
The company’s degree of operating, financial and combined leverage
Take one of the following positions and justify your decision:
You are a banker who has been approached by this company to borrow a sum of money (you decide how much, and why). Based on the company’s financials and its future business prospects, would you loan the money? Why or why not.
You are an investor with a large sum of money (or a company looking for an investment), and buying either the company or shares of stock in the company is being considered.
Determine, based on the company’s financials and its future business prospects, whether you will invest in this company or not.