Corporate Finance Cases

Running Head : Corporate Finance

Corporate Finance Cases

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Section A : Case Summaries

Case : Bed Bath Beyond

: Optimal Capital Structure

The case deals with the capital structure decision facing a retail chain by the name of Bed Bath Beyond . The company retails a wide range of items related to home furnishing through 575 stores , up from 34 in 1992 all as a result of massive profit retention and hence organic growth The company also owns a majority stake in two other retailers , Harmon Store

(a discount beauty and health retailer CTS (a retailer of giftware and home dycor . The company has been able to effectively register record profits through a dedicated strategy of cost savings , an innovative marketing mix and massive earnings retention . At present , the company has no debt on its balance sheet and 867M of cash and near cash balances that are roughly 400M above their requirement . The company has no potential targets for acquisition with enough expected cash inflows to support their organic expansion plans . The company pays no dividends

In this scenario , many security analysts predict that the company 's excess cash balances in a period of falling interest rates are negatively effecting traditional accounting ratios like growth in ROE and EPS and with enough cash flows to cover its organic expansion plans the company should issue debt and with the combined excess cash balances make a share repurchase or a special dividend , thus re capitalizing and hence increasing EPS and...