Walgreens: The Corporate Financial Decision Making Analysis
Walgreens’ principal activity is to operate a chain of retail drugstores that sells prescription and nonprescription drugs. The company also carries additional product lines like general merchandise including cosmetics, food, beverages and photofinishing. Walgreens is one of the fastest growing retailers in the United States and led the chain drugstore industry in retail sales and profits last year.
The capital structure of this retail drugstore is determined by 42,5% Debt and 57,50% Equity due to $8.239 of the total debt and $11,104,30 of Equity resulting in $19,313.60 of Total Liabilities and Shareholders’ Equity for 2007. Among the main debt-financing sources, Walgreens has different letter of credits standing since 2006 to guarantee foreign trade purchases, payments of casualty claims as well as performance of construction contracts. The letters of credits for payments of casualty claims are annually renewable and until the casualty claims are paid in full, they might remain in place.
In addition, short-term debt was acquired to finance the need of capital. According to Walgreens’ Notes to Consolidated Financial Statement, the company issued commercial paper to support working capital needs and furthermore, in connection with the purchase of Option Care, Inc. and affiliated companies, $146.8 million of convertible debt was acquired. Moreover, Walgreens has lines of credit that total $1.2 billion. The first $600 million facility expires on August 12, 2008, the second on August 12, 2012.
Walgreens has a stock compensation plan that gives non-executive employees the opportunity to purchase common stock over a ten-year period upon the purchase of company shares, subject to certain restrictions. The share-buy-procedure is through cash purchase or loans made by eligible employees.
On the other hand, the company's strategy is to be the nation's most convenient healthcare provider,...
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