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Effect on Working Capital Policy

Effect on Working Capital Policy

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A company??™s current assets are known as working capital Gitman, 2009, p. 638). In addition, working capital policy is the level of current assets and in the manner funded. Organizations can develop a working capital policy through established strategies either conservative or aggressive. With an aggressive policy it proposes added risk plus additional profits to Wal-Mart as this policy is funded with short-term and long-term debt. Risk correlated by aggressive policy enhances because of the possibility that Wal-Mart may not be able to meet its obligations. With a conservative capital policy Wal-Mart can attempt to sustain additional monies and fund long-term and short-term requirements by means of long-term debt. Moreover, conservative policy proposes less of a threat along with fewer profits, and is costly.
If Wal-Mart carried extreme amounts of current assets it has a negative consequence. Recompense of debt can turn out to be problematic plus financing plans may be affected. Decrease amounts of current assets may perhaps have a reverse outcome.?  Wal-Mart employs various ratios and capital in establishing modifications in its working capital. Preserving stability concerning elements of Wal-Mart??™s working capital assists in sustaining positive day-to-day organizational operations.
For Wal-Mart??™s to have a profit the retailer??™s revenue must surpass company expenditures. A loss is Wal-Mart??™s expenditures surpass profits. In regard to Wal-Mart??™s consolidated statements of income net sales for 2011 is $418,952 (in millions), calculating the projected 20% revenue increase net sales forecasted would be $837,904 (in millions).
Regarding Wal-Mart??™s repurchase program, on June 3, 2010, the board of directors approved a new $15.0 billion share repurchase program, which was announced on June 4, 2010 Wal-Mart, 2011, p. 24). The program has no expiration date or added constraints regulating the time over, which Wal-Mart may, acquire share purchases, and ends merely once Wal-Mart has repurchased $15.0 billion of outstanding shares within the program. Every share bought back is retired and put back to unissued status (Wal-Mart, 2011, p. 24). If Wal-Mart had a revenue increase of 20% it would allow the retailer to continue with the repurchase program! Wal-Mart would be able to increase investments and its growth plans, but only if the retailer??™s working capital is appropriately overseen.

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