Question

Briefly explain the capital structure of Best Buy and Walmart. What are their similarities and differences?

Answer 1

Best Buy is largely an equity financed company with equity forming 93.94% of its total capital and debt forming just 6.06% of its capital.

Walmart, on the other hand, has 86.63% of its total capital in the form of equity with the balance 13.37% of capital in the form of debt.

In terms of similarities both Best Buy as well as Walmart is less leveraged companies and a high proportion of their capital structure is composed of equity and debt constitutes only a minor portion of total capital.

In terms of differences Walmart’s debt of 13.37% of total capital is more than double of Best Buy’s percentage of 6.06%. Thus on a relative basis Walmart is more leveraged than Best Buy.