Analysis of Capital and Risk Management of Walmart

The Analysis of Capital and Risk Management of Walmart
Author's Name
The Institutional Affiliation
Course Number and Name
Instructor Name
Assignment Due Date
The Analysis of Capital and Risk Management of Walmart
Introduction
In today's business world, financial management, capital management, and risk management play a crucial role in the success of any organization. Financial management involves managing an organization's financial resources, such as cash, assets, liabilities, and investments, to achieve its financial goals. On the other hand, capital management involves managing an organization's capital structure, including equity and debt, to optimize its cost of capital and maximize shareholder value (Roberts et al., 2013). Risk management involves identifying, assessing, and mitigating risks that could adversely impact an organization's financial performance and reputation. One of the largest retailers in the world, Walmart, has successfully managed its financial, capital, and risk management strategies to achieve its goals. Walmart strongly focuses on optimizing its capital structure to maximize shareholder value. The company's capital structure comprises equity and debt, with a target debt-to-equity ratio of approximately 0.60. The company uses a variety of financing options, including long-term debt, commercial paper, and leases, to fund its operations (Jankensgård, 2019). One of the key risks Walmart faces is supply chain risk, particularly concerning sourcing products from overseas suppliers. To mitigate this risk, Walmart has implemented various strategies, including diversifying its supplier base, improving supplier relationships, and implementing technology solutions to improve supply chain visibility and risk management. Walmart's comprehensive risk management program identifies, assesses, and mitigates organizational risks. The company's dedicated risk management team works closely with business units to identify and manage operations, compliance, reputation, and financial performance risks. This paper will provide an overview of Walmart's capital and risk management strategies, including its approach to managing its capital structure, identifying and mitigating risks, and the role of technology in supporting these efforts.
Discussion
Capital Management Analysis of Walmart
Walmart is known for its efficient capital management practices, which play a significant role in its success as a retailer. One key theory supporting Walmart's capital management strategy is the Modigliani-Miller theorem. According to this theory, a firm's value is not affected by its capital structure, and the cost of equity and debt financing is equal, assuming no taxes or bankruptcy costs. In recent years, Walmart has significantly reduced its leverage and improved its credit rating. The company has reduced its total debt by approximately $10 billion over the past two years, primarily through debt repayments and refinancing (Jankensgård, 2019). This has helped Walmart achieve a strong investment-grade credit rating, reducing its debt cost and improving its access to capital markets. To optimize its cash flow, Walmart also actively manages its working capital, including inventory, accounts receivable, an...