Strategies For Maximizing Shareholder Wealth Essay

6767 words - 27 pages

University of PhoenixWorking Capital Management Strategies - Shell OilShell working capital management strategy is so effective and efficient that it reflects strongly the healthy financial balance sheet, higher share price, effective operating cash flow and higher refining and marketing profits, couple with an efficient performance from their chemical and power units help overall profits thereby maximizing shareholders wealth. Despite its lower production of only 78,000 barrels daily due to militant groups attack in the west delta region of Nigeria. "Cash flow from operating activities reached a record level of $34.5 billion in 2007 compared with $31.7 billion in 2006 and $30.1 billion in 2005. The increased cash flow from operations was driven mainly by the growth in income to $31.9 billion in 2007 from $26.3 billion in 2006 and 2005 as well as a reduction in taxation paid in 2007 compared to 2006. Shell's financial position is robust, and we returned over $13.4 billion to our shareholders through dividends and buy backs in 2007. Cash and cash equivalents amounted to $9.7 billion at the end of 2007(2006: $9.0 billion)." Retrieved from Mergent online, University of Phoenix, May 20, 2008.Cash flow is the life wire of organization, Shell with a robust cash flow thus has much flexibility and a potential competitive advantage in the global market. This is illustrated, as the disruption of supply in certain geographical region, Nigeria, did not affect the financial cash flow of the firm. Shell current assets - inventories in 2007, $31.503 billion, 2006, $23.215 billion, accounts receivable 2007, $74,238 billion, 2006, $59,688 billion and cash and cash equivalents 2007, $9,656 billion, 2006, $9,002 billion, in comparison, the company total current assets in 2007 was $115,397 billion compare to $91,885 billion in 2006. Shell is super solvent to handle and pay bills and simultaneously maximize shareholders wealth. "Current assets are presented in the balance sheet in order of their accounting liquidity - the ease with which they can be converted to cash at a fair price and the time it takes to do so." (Ross, 2005, P.730).Working Capital Management Strategies - - Luby's Inc.Luby's Inc. working capital management is concerned with current assets, current liabilities, and their relationship to the rest of the firm. Working capital policies affect the future returns and risk of the company; hence, they have an ultimate bearing on shareholders wealth. "cash and cash equivalents and short-term investments increased by $16.4 million from the end of fiscal 2006 to August 29, 2007, primarily due to cash flows from operations partially offset by capital expenditures. We had a working capital deficit of $1.9 million as of August 29, 2007, which represented a $15.8 million improvement compared to $17.7 million as of August 30, 2006. We expect to meet our working capital requirements through cash flows from operations and availability under the revolving credit...

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