Free Essays

Costs and expenditures

While Best Buy has recently developed business setbacks due to the current economic down cycle, it has issued cash back to its shareholders. Most recently, it has been in the practice of issuing dividends through the buy back of stock. In the summer of 2008, the company was able to issue an 8% increase in its dividends. As such, investors were quite happy with the company’s direction. Unfortunately, the recent worldwide recession has altered the outlook of Best Buy’s financial situation.

It would probably be more benefit for Best Buy to return cash to its shareholders through spinning off assets or outright selling them. This is because Best Buy is a company in a very depressed industry: retail sales. Many retailers have filed bankruptcy due to declining revenues. As such, it might be wise for Best Buy to liquidate assets since this would eliminate much of its costs and expenditures. This would allow the company to return dividends to investors without the problem of excess overhead associated with maintaining a huge retail “empire” in a global climate of declining sales.

Through selling off assets, the company might be able to acquire the excess cash needed to pay dividends. If the company were to hold on to assets that were frequently losing money then the ability to pay dividends would obviously be limited. This is because there would be no excess cash on hand to pay out. Granted, there is no absolute guarantee that Best Buy would have excess cash if it were to spin assets. However, it would definitely be in a better position than it would be if it held on to them interminably.