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Introduction

Bed Bath & Beyond Inc. is a nationwide chain of 575 retail stores selling goods servants (bedding, bath items and kitchen textiles) and household goods (kitchen and tabletop items, small appliances, and the main products at home). BBB is not long debt on its balance sheet and the projection of the cash balance will grow to more than $ 3 billion. By cash and access the issuance of debt BBY could improve return to shareholders and increase earnings per share. Although the balance BBBY is strong, there is a risk of having too much money.

Risk does not attract or retain investors because of their desire to maximize their profits. If an investor sees too much money on the balance sheet, they can cast doubt on the company's ability to manage its capital structure efficiently, and therefore the question of their ability to maximize shareholder value. Although BBBY uses its funds for storage growth and small acquisitions, they should also be focusing on using their cash to increase shareholder value. By cash and access the issuance of debt BBY could improve return to shareholders and increase earnings per share. But the question is how much debt is enough to increase profitability without the threat of bankruptcy risk.

Discussion

Business risk in case of BBBY appears to be relatively low. Products they sell are manufactured by companies brand, so they are not liable for defective products. BBBY has no control over the quality of products they sell, so there are no significant costs of switching. Clients were impressed with their experience in the stores, which lead to high performance. The leaders of the freedom of choice of goods and how to display it. This allows individual stores to better serve their local communities. This understanding of individual locations contributed an operating margin of 14.3% BBBY be much higher than the industry average at 5.1%. They are also able to cut costs in various ways, allowing them to pass savings on to customers in the form of discounts and help BBBY beat competitors and have a steady growth.

The disadvantage is that the degree of BBBY operating advantage in the high-level 2.93, indicating a high risk business. If the manual adds a fixed operating costs in their business operations without increasing sales, reducing company profits, and it becomes possible total costs exceed sales and firms report losses. However, this is unlikely based on past performance.

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