Corporate Finance Assignment 3
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Introduction
The Royal Dutch Shell has been involved in the energy business, which deals in finding,
developing, processing, and marketing oil and natural gas since the inception of the company.
The latest figures for the BG deal are $3.5 billion, through which the company will be on top of
the global players in the energy sector. The improvement in cash flow and the basis of reducing
debt, from 25.8% to 23.6% in the first half, helped Royal Dutch Shell to implement a $ 25 billion
buyback program successfully. The first repurchase program of Royal Dutch Shell focused
primarily on emphasizing to the company's investors the commitment that the corporation has
held onto its stance as one of the top energy companies worldwide. The Royal Dutch stock price
decreased to 67.67 points or 3.7% during the most popular trading session, closing under an
average of fifty days (Narayanan, 2018). Buybacks are oil price and surrounding conditions and
ConocoPhillips, which underwent an increase of 0.4% to 71.80 to close at one cent to its price
beforehand.
Consistent dividend policies, in turn, are critical for companies to ensure they attract and
maintain investors' satisfaction. With the constancy of dividend payouts, investors can expect
regular cash flows. This is very important when people have retired or need contributions to
improve their passive earnings. Constant dividend policies give investors and the company a
sense of security because of the former's faith in financial viability and productivity. This would
not only sustain the company's reputation and bring investors who prefer stability to the
company but also provide long-term regular income that investors prefer. Also, dividend policies
in the manner of stability as shown by the market result in an increase in the company stock price 3
since it illustrates the company can run well and the finance does its work earnings results which
Companies resort to different methods of letting their stocks out on the market. One of
the most important reasons is to pay the surplus cash to shareholders. By purchasing their shares,
companies decrease the number of outstanding shares, leading to increases in the earnings per
share (EPS). The rise in stock price can follow such news, which influences the company's
revenue. One of the causes of stock repurchases here is that the company is sending a positive
sign of optimism about its future progress and perspectives (Al-Utaibi et al., 2023). When the
company gets its shares into the bag, the management is confident that the shares bought are
undervalued. This creates investment interest and increases market sentiment towards the
company. Besides, stock repurchases can help businesses refine their capital structure by
deploying excess cash cleverly through stinting the cost of equity financing. The text discloses
Shell's recent action concerning share repurchase and highlights the significance of payout policy
implementation. It raises the reasons for it. Corporations typically increase the purchase of their
stocks directly through a cash dividend to shareholders or the signaling of more robust corporate
prospects.
How Individual Financial Metrics Are Affected by Stock Repurchase Plans and Return
Returning a firm's shares to the business benefits or harms the investors, contingent on
whether this transaction happened and whether the company gave the intrinsic value less than the
shares. This move results in the reduction of existing market shares and the organization's total
assets. In turn, this situation will favorably influence the business and its shareholders. Such a
change in the public's perception would lead to their decreasing stock holdings, thus making it 4
more profitable and attractive for most of them. A decrease in the number in the denominator for
a beautiful high reward will, as a matter of consequence, record good performances both on the
return against assets and the returns against equity (Chen & Liu, 2023). As in the case of interest
payments that reduce the pre-taxed earnings on borrowed capital, it is considered that the firm's
earnings decline when they use their own money to finance the purchase of the company shares.
As a result, PR set off a process that leads earnings per share to rise. Suppose the mean unit cost,
determined based on the official exchange ratio, exceeds the share price per unit. In that case, the
book value per unit will decrease due to repurchasing at the level that equals or exceeds the
market value. Owing to the high share prices, they will invest more in the stock to buy shares
with a low value, which will lower the per-share book value for the already existing shares.
The company chosen for this essay write-up is Walmart Inc., a multinational retail
corporation that operates a chain of global discount store departments, hypermarkets, and
grocery stores. At the end of January 2022, Walmart had several clubs working under 56 names
in 27 cutting-edge countries. According to Walmart's recent annual analysis, its current liabilities
We can calculate Walmart’s Days of Working capital (DWC) as follows using these
figures:
Sales= $559,151 million (Walmart annual revenue according to 2022 report carried out
annually) 5
capital=50.3 days.
This indicates that assuming no extra cash inflow or outflow at that time, Walmart's
financial resources can support its business activities for 50.3 days. How does the company's
ratio compare to its competitors? Walmart's DWC is relatively high compared to that of its rivals
in the retail sector. One of Walmart's main rivals, Target Corporation, has forty-three DWCs,
while Costco's wholesale Inc's DWC is twenty-five days. It would be better for the corporation if
the DWC were more remarkable since it would show that the business has additional funds to
The DWC (Days Worked in Cash) level is higher for Walmart than other retail industry
competitors. Target Corporation has to pay 43 DWCs of Walmart's competitors, and the DWC of
wholesaler Costco, Inc.'s indirect purchase is 25 days. Corporations would be more desirable if
the DWC were outstanding, as it indicates the adequacy of funds for their core activities' upkeep.
The degree of Walmart's efficient cash management can be deducted by referring to its
DWC as the norm in the industry. DWC, which is much higher than the industry average, may
refer to difficulties the firm faces in inventories or cash flow management. The profit and
position of the business may be efficiently looked at via the comparison of its DWC with the
rivals working in the industry (Aslamiah et al., 2023). A company that has a larger DWC than its
competitors is the one that is running cash more efficiently, and as a result, it is the one that has
more assets available to fund its operations on a day-to-day basis. Small DWC, in turn, points to
the company's necessity for assistance in controlling its finances and paying its short-term debts. 6
For instance, we can see whether a company holds reasonable cash in its reserves or is
financially weaker than its peers when we compare its DWC to the industry's average.
Proper supply chain management can greatly improve a Firm's DWC efficiency.
Walmart's supply chain is well-recognized, thanks partly to its effectiveness and efficiency,
meaning that the company can keep an inventory low even as it meets consumer demand.
Owning fewer inventories means that Walmart does not have to build up its working capital and
can get a more favorable ratio between receivables and inventories. Walmart's supply chain is
well-suited to haggle into creditable credit conditions with vendors, consequently improving cash
flow management. With appropriate controls over their stock, companies like Walmart might
gain the advantages of working capital being administered more and more effectively and
achieve further financial gains (Yao et al., 2023). As supply chain management works
significantly to create a high DWC, Walmart may lose such ability in case of supply chain
mismanagement. Walmart's supply chain is highly effective, allowing the corporation even to
hold very low inventory stock with which it still manages to satisfy customers' needs. The
situation may go on for Walmart when it will manage to cut the needs of its working capital and
Moreover, Walmart can gain superior payment terms through the supply chain when
hiring/contracting suppliers. Generally, this undertaking helps a company better control its cash
flow. Various elements of Walmart's supply chain can be streamlined, which ensures the more
effective functioning of financial liquidity, high profitability, and the retail market's
competitiveness. 7
Conclusion
The company's days of working capital (DWC) can be enhanced significantly with
efficient supply chain management, best illustrated through the example of Walmart. Such
companies as Walmart can manage their cash flows more efficiently by lowering inventory
levels and negotiating favorable payment terms with their suppliers. As well as this, they can
improve their financial liquidity and strengthen their competitive position in the retail market. 8
References
Al-Utaibi, K. A., Siddiq, S., & Sait, S. M. (2023). Stock Price Forecasting with LSTM: A brief
https://www.worldscientific.com/doi/abs/10.1142/S1793048023410047
Aslamiah, S., Karyatun, S., & Digdowiseiso, K. (2023). The Influence of Return on Assets,
Current Ratio and Debt to Asset Ratio on Financial Distress in Consumption Goods
https://jurnalsyntaxadmiration.com/index.php/jurnal/article/view/843
Chen, N. Y., & Liu, C. C. (2023). The impact of share repurchases on equity finance and
https://www.sciencedirect.com/science/article/abs/pii/S1062976922001405
Yao, C., Fan, B., Zhao, Y., & Cheng, X. (2023). Evolutionary dynamics of supervision-
https://www.sciencedirect.com/science/article/abs/pii/S0038012123000988
