Explore BrainMass

Explore BrainMass

    Capital Deployment and Total Shareholder Return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Below is the link to the article
    http://ww2.cfo.com/cash-flow/2013/01/the-envelope-please-the-2012-capital-deployment-awards/
    Below are the questions to answer based on the article. Please make your response very detailed.

    Question #1: According to the finance theory we have discussed so far in the course, what rule(s) should managers use to decide how to deploy capital? Does this line up with the discussion in the article? Explain why or why not. What are some ways that shareholders can ensure that managerial decisions are made in their best interests?

    Questions #2: Is it reasonable to conclude from reading the article that firms would achieve higher TSR by making acquisitions or stockpiling cash? Why or why not? What additional information would you need to properly assess the impact on shareholder wealth of the various capital deployment choices described in the article?

    © BrainMass Inc. brainmass.com June 4, 2020, 5:29 am ad1c9bdddf
    https://brainmass.com/business/the-time-value-of-money/capital-deployment-and-total-shareholder-return-631891

    Solution Preview

    Question #1: According to the finance theory we have discussed so far in the course, what rule(s) should managers use to decide how to deploy capital? Does this line up with the discussion in the article? Explain why or why not. What are some ways that shareholders can ensure that managerial decisions are made in their best interests?

    A1: The overall goal of capital deployment is to generate as much wealth for shareholders as possible. However because of almost unlimited options available, the process behind making capital allocation decision is complex. Some of the options for capital deployment are returning cash to shareholders via dividends and repurchasing shares of stock. The company may also wish to devote more funds to investment in growth opportunities such as acquisitions (Capital allocation, n.d). This does line up with the article as it discusses capital deployment techniques that are likely to lead to better shareholder performance through a balance of growth, profitability, and capital utilization. At the same time, the article makes redundant, the techniques that were used by companies 10 years back to deploy capital. The techniques are changing at a fast pace based on changes in the marketplace and it is in the best interest of companies to identify these changes and align their capital deployment strategies accordingly. For ...

    Solution Summary

    Analysis of article with focus on interrelation between capital deployment and TSR.

    $2.19

    ADVERTISEMENT