Wal-Mart Capital Structure and Financial Analysis Essay

Wal-Mart Capital Structure and Financial Analysis - Essay ExampleTotal Assets (Fixed + Current)=$27,638_ x 100$120,223=22.9%Debt to candour RatioThe debt to equity ratio measures the relationship between a companys debt capital and equity capital. It shows the percentage of a companys equity that has been financed by external debts. The debt-to-equity ratio for Wal-Mart has been mensurable asDebt-to-Equity Ratio=Total Debt Capitalx 100Total Equity Capital=$27,638 x 100$49,396=55.95%CALCULATION OF WEIGHTED AVERAGE cost OF CAPITAL In the Weighted Average Cost of Capital (WACC) involves the calculation of separate items in the capital employed and then weighting the cost of individually element by its proportion of the total capital employed. There are following factors in the Wal-Marts total capitalEquity (Common nisus)Debt (Long-term Debts)$% Of Total4,311 Common Stock of $0.10 (par)423m1.75%Long-term Debt23,669m98.24%Total Capital Employed24,092m100%Cost of EquityThe cost of equi ty estimates the cost of putting green and preferred stock. But for Wal-Mart, this calculation allow not include preference stock because the company has not issued any preference shares. The analysis of Wal-Marts one-year report reveals that the company is expecting to pay $0.150 dividend per share to its common shareholders. For dividend growth, we gull it to be 10% annually. The cost of common share capital has been estimated with the help of following formulaCost of Common Share Capital =(Next annual dividend / current market price) + annual dividend growth=($0.150 per share / $50.49 per share) + 10%=10.29% per annum.Cost of DebtThe calculation of cost of debt will encompass all the have-to doe with bearing long debts of the company. According to the Wal-Marts...There are following factors in the Wal-Marts total capitalThe cost of equity estimates the cost of common and preferred stock. But for Wal-Mart, this calculation will not include preference stock because the compan y has not issued any preference shares. The analysis of Wal-Marts annual report reveals that the company is expecting to pay $0.150 dividend per share to its common shareholders. For dividend growth, we assume it to be 10% annually. The cost of common share capital has been estimated with the help of following formulaThe calculation of cost of debt will encompass all the interest bearing long-term debts of the company. According to the Wal-Marts annual report, the companys weighted average effective interest rate on long-term debt is 4.08% in 2005. The tax rate applicable to the company for the year is 34.7%. The cost of long-term debt has been estimated asAs analysed from the companys financial statements and the calculation of financial ratios, the capital structure of Wal-Mart has become evident. Wal-Mart has structured its capital living in a way its external debts or borrowings do not exceed its total equity to a greater extent.