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Even their regular dividends were increased from 8 cents per share per quarter to 16 cents. This is quite a high rate of increase. This sort of announcements was also made by banks like Wachovia and Mellon, and consumer staples like Altria and Kraft. The attitude of the investors can be seen from the fact that the companies which have traditionally paid dividends have performed better in terms of share price than shares which do not pay good dividends, and this change has started from the beginning of 2004. Part of the change in attitudes of the companies may have come because of the reduction in taxation, which has been discussed already. (Dividends Are Back!)
Even in Europe, companies like Carrefour have increased their dividends, and this has led to improvements in market values of their stock. We are all aware that ordinary stocks do not guarantee the payment of…
Goldfinger. Basics of stock market. 6 September, 2004. Retrieved at http://www.financegates.com/education/brokerage/2004-09-06/edu06092004.html. Accessed on 16 June, 2005
Hamilton, Adam. Dividend Valuation Waves. January 10, 2003. Retrieved at http://www.zealllc.com/2003/dividend.htm . Accessed on 16 June, 2005
Dividends Are Back! Retrieved at http://www.globalinsight.com/Highlight/HighlightDetail1182.htm . Accessed on 17 June, 2005
Dividends Dissected. TD Water House Press Centre. 4 January, 2004. Retrieved at http://www.tdwaterhouse.co.uk/presscentre/press.cfm?itpID=7Accessed on 17 June, 2005
What are the practical considerations which are likely to influence a firm's dividend policy? Does a firm's dividend policy matter?
Inside a firm's dividend policy there are a number of different factors that will have an impact upon: the amount and if one will be paid to shareholders. The most notable include: the growth rate of the company, credit agreements, earnings stability, maintaining control over the float, uncertainty, the ability of the company to receive financing from outside sources, financial leverage, age / size and possible tax consequences.
The Growth Rate of the Company
As far as the growth rate of the company is concerned, this will influence a firm's dividend policy by: requiring that a larger portion of their funds are used to support new opportunities in the future. This is because many growing companies may be in industries that are so new that it is not…
Amazon.com. (2011). Yahoo Finance. Retrieved from: http://finance.yahoo.com/q?s=amzn&ql=1
Capital Structure. (2011). Investwords. Retrieved from: http://www.investorwords.com/733/capital_structure.html
Dividend. (2011). Investopedia. Retrieved from: http://www.investopedia.com /terms/d/dividend.asp
Dividend. (2011). Invest Words. Retrieved from: http://www.investorwords.com/1509/dividend.html
Dividend Policy for Home Retail Group Plc and Yell Group Plc 2008, 2009, 2010
Once a company is profitable, the executives must determine what to do with the profits. The firm may continue to retain the profits, or it may pay out the profits to the owners/shareholders of the firm in the form of dividends. Once the firm decides on whether or not to pay dividends, it may establish a semi-permanent dividend policy, which may, of course, impact investors as well as the perception of the company in the global financial markets. See, hattacharyya, N. (2007). Dividend policy: a review, Managerial Finance, 33 (1), pp 4 -13.
What executives decide depends on the situation the company faces now, and is likely to face in the future. The policy also depends on the preferences of investors and potential investors. The most common dividend policies are as follows:
• Constant Dollar Dividend…
1. Bhattacharyya, N. (2007). 'Dividend policy: a review', Managerial Finance, 33 (1), pp 4 -13.
2. Brav, A, Graham, JR, Harvey CR and Michaely, R. (2005). 'Payout policy in the 21st Century', Journal of Financial Economics, 77, pp 483-528.
3. Denis, DJ and Osobov, I. (2008). 'Why do firms pay dividends? International evidence on the determinants of dividend policy', Journal of Financial Economics, 89, pp 62 -- 82.
4. Foerster, SR and Sapp, SG. (2006). 'The changing role of dividends: a firm-level study from the nineteenth to the twenty first century', Canadian Journal of Economics, 39 (4), pp 1316 -- 1344.
It carries the balanced and effective cash flow in a long-term period and fosters the value of a firm. The crux is to render firms more adaptable to future changes of environments and realize value creation and continuous growth. Since value creation happens to be the initial stage of value management, therefore the main feature of a dividend policy founded on value management and rising it to realize the maximum of a firm's value, and foster enterprise's long-term development while considering the dividend policy. However dividend policy based on value management concentrates on the firm's long-term sustainable development, but does not give attention to the firm's short-term state increasingly. (Wang, 2006)
Discussion of stock valuation inexorably results to consideration of the role of dividends. A firm's fundamental position at this point is dependent on one's attitude toward (i) the impact of subdivision of the stream of income which supports the…
Chamberlain, Neil. W. (1962) "The Firm: Micro-Economic Planning and Action." McGraw-
Chew, Donald. H. (1986) "Six Roundtable Discussions of Corporate Finance" Quorum
However, theoretically, they could experience a dramatic increase in the future, if the company is run well. According to the article in Forbes magazine entitled "A Progressive dividend policy," the final outcome for Progressive shareholders is likely to be an increase in profits during most ordinary, reasonably profitable years, although now dividends will be paid annually rather than quarterly (Carlson 2006, p.1). (This may also be seen as a negative by investors, who might want to pocket the dividends as soon as possible to reinvest and therefore make more money and capitalize upon their income in other ways).
What would change if Progressive Corporation used another dividend policy?
According to longtime investment analyst Charles Carlson (2006), dividend payments can take a variety of forms -- from increasing to omitting payments altogether, to paying special dividends during historic changes, to radically varying the schedule of payment. But the Progressive Corporation's strategy…
Bowery, Angela. What is gainsharing? Retrieved October 9, 2010 at http://www.angelfire.com/mo3/acotrel/labourman/Gains.htm
Carlson, C.B. (2006). A progressive dividend policy. Forbes.com. Retrieved October 9, 2010 at http://www.forbes.com/2006/05/18/progressive-dividend-drip-in_cc_0518soapbox_inl.html
How and why do companies pay dividends? (2010). Investopedia. Retrieved October 9, 2010 at http://www.investopedia.com /articles/03/011703.asp' target='_blank' REL='NOFOLLOW'>
A regular cash dividend is paid out of the company's cash supply. The dividend can be at a fixed rate, or can be loosely tied to the company's net income. This is the most common form of dividend, and is paid under most circumstances. hereas a regular cash dividend is a recurring dividend, an extra cash dividend is a non-recurring dividend (Investopedia, 2012). This is a one-time dividend that is paid by the company. There is no expectation of a future extra dividend, in contrast to a regular dividend. A special dividend is the same thing as an extra dividend. The only slight difference is that something termed a special dividend is not necessarily going to be paid out of cash. The company may pay with shares or some other asset. Most commonly, however, this type of dividend will be paid out of cash.
A liquidating dividend is fundamentally…
Investopedia. (2012). Extra dividend. Investopedia. Retrieved April 15, 2012 from http://www.investopedia.com /terms/e/extradividend.asp
Investopedia. (2012). Definition of liquidating dividend. Investopedia. Retrieved April 15, 2012 from
Therefore, 'on balance, much empirical evidence supports the view of dividends as a signaling device'. There have been reported instances when the management has deliberately reduced the expected worth of the dividend, considered to be a strategic decision aimed at the improvement of the financial flexibility and growth prospects on long-term scale.
However the managers of the company have practiced such options, where they have 'used dividend actions to convey useful information, keeping in view the fact that dividend changes may not be perfect signals'. It has been agreed the by economic and strategic advisory of the company that 'dividend increases may be ambiguous signals unless the market can distinguish between growing firms and disinvesting firms, i.e., those with a lack of investment opportunities', therefore the Linear Technology has ensure that there is no compromise over the reputation of the company.
Several interesting patterns have been identified which are widely…
Capital gains and dividend taxes were both initiated in the early 1970's, by the Democratic Party. efore dividend taxes were enforced, the government made its money through higher aftertax yields, The dividend tax was originally supposed to be a progressive measure, so that the wealthiest paid correspondingly more than the poorest because they had benefited more. At this time, only the wealthy invested in stocks. This is no longer true. Most middle-class people today are investors in the market and they do not have the expensive accountants hired by the rich to shield their investments from tax.
Investing in the stock market has become far more widespread over the last two decades, as 84 million people - representing nearly half of all American households - owning stock. Tax-deferred investment tools such as 401(k) plans and individual retirement accounts (IRAs) have placed millions of Americans who make $60,000 or…
Beach, William. (January 23, 2003). Just what our economy needs. San Diego Union-Tribune. (Berlau, John. *February 6, 2003). Accounting firm fights dividend-tax cut. WorldNetDaily. Retrieved from the Internet at http://civilliberty.about.com/gi/dynamic/offsite.htm?site=http://www.wnd.com/news/article.asp%3FARTICLE%5FID=30894.
Centre for International Co-operation and Development. (2003). Corporate Income Tax. Retrieved from the Internet at http://www.gzs.si/ENG/busenv/financ61.htm .
Edwards, Chris. (January 7, 2003). Nearly All Major Countries Provide Dividend Tax Relief. The Cato Institute. Retrieved from the Internet at http://www.cato.org/dailys/01-07-03-2.html .
Hall, Joshua. (January 31, 2003). Dumping fed dividend tax practical on several levels. Columbus Business First. Retrieved from the Internet at http://www.bizjournals.com/columbus/stories/2003/02/03/editorial3.html .
This balkanization is partially driven by the lack of integration between various segments of itself, and this is primarily a technological limitation. Yet the far broader and more difficult challenge in this regard is the segregating of knowledge not just for profit, but for lasting competitive advantage between nations. On the one hand there is the need for competitive differentiation in company's offerings, yet in others including the sharing of primary research in medicine and biomedical fields and stem cell research there is the ethical responsibility to share these insights gained to foster solutions to the world's most pressing medical problems. M. Van Alstyne and E. Brynjolfsson, researchers on the growth patterns and threat of Internet balkanization from MIT, remark in their conference paper from a 1996 conference that the balkanization of science is a significant threat. The two MIT researchers cite the studies they have completed showing how despite…
ESRI (2006). Environmental Systems Research Institute. Retrieved from the Internet on July 14, 2006. (www.esri.com)
Gates Technology Foundation (2005). Interviews and on-site visits with GIS planners and network technicians while donating servers, laptops, and desktop computers for a major PC manufacturer. Onsite interviews in Seattle, Washington. April, 2005.
HHS (2006). Federal Register Data on Poverty Line Statistics by size of household. January 24, 2006. See table 1 of this document.
Pew Center for Internet Research (2006). Key statistics downloaded from the Internet on February 14, 2006. http://people-press.org/
y encouraging shareholders to reinvest their profits, the company will improve its market position and hopefully yield a profit for its shareholders at a much higher margin in the future. Dividend reinvestment programs, because they usually require no brokerage fees, and allow stock to be purchased directly from the company, incentivize the purchase of more stock by current shareholders. They are an excellent way for shareholders to easily and effortlessly build their stock portfolio and small companies to encourage expanded ownership. Shareholders are given a potentially more lucrative way of slowly growing their earnings, rather than receiving a (relatively small, in the case of CAE) dividend.
Suggested changes: Suggestions
Currently CAE only allows Canadian investors to engage in the dividend purchase option. In the future, to expand foreign investment in the company, it could extend a similar policy to all shareholders, regardless of nation of origin.
Dividend reinvestment policies encourage…
"Investors." Official CAE Website. January 26, 2011.
"Preferred stock." Investopedia. January 26, 2011.
Why company pay dividend to shareholders? Why dividends not really affect the shareholders? What the shareholders prefer low or high dividends? Why, Explain?
A company may opt to pay dividend to its shareholders in order to make considerable earnings of the corporate profits. State's law varies on how dividends ought to be paid. Dividends do not really affect the shareholders because it is not compulsory for a company to pay dividends. Kurtz & Boone, (2011) indicates that companies are under no legal obligation to pay dividends to shareholders. Shareholders prefer high dividends because they earn more profits from their shares on the company (Kurtz & Boone, 2011).
In term of Dividends and Signals, Asymmetric information -- managers have more information about the health of the company than investors. Changes in dividends convey information:
• Management believes it can be sustained
• Expectation of higher future dividends,…
Baker, H.K., & Kolb, R.W. (2009). Dividends and dividend policy. Hoboken, N.J: Wiley.
Kurtz, D.L., & Boone, L.E. (2011). Contemporary business. Hoboken, N.J: Wiley.
According to the Miller-Modigliani Hypothesis, dividends do not affect value. This theory reasons that if a firm's investment policy doesn't change, the value of the firm cannot change with dividend policy. Therefore, investors should be indifferent to receiving either dividends or capital gains. but, the Miller-Modigliani Hypothesis has underlying assumptions that don't hold in the real work. It assumes there are no tax differences between dividends and capital gains and that companies do not use the excess cash they have as result of not paying the dividends for bad projects or acquisitions (Dividend policy). As these situations occur, there are distinct advantages and disadvantages of dividends
3.1 Advantages of Dividends
Stockholders may value regular cash payments that dividends offer and many may not face the tax disadvantages of dividends (discussed in the next session of this paper). and, unlike volatile stock prices firms generally do not change their…
Buybacks vs. dividends (2006, February 2). Nightly Business Report. http://www.pbs.org/nbr/site/onair/transcripts/060202c/
Dividend policy. http://pages.stern.nyu.edu/~adamodar/New_Home_Page/lectures/dividend.html
Hughes, C. And O'Doherty, J. (2007, February 22). Companies put faith in buy-backs and special dividends. Financial Times, p. 22.
This method is popular amongst firms in cyclical industries, as it allows them to curtail dividends during down cycles and reward their investors handsomely during up cycles.
The market analyzes stocks based on their returns, of which dividends are just one components. Dividend policy is considered to be a measure of a company's financial health, and a function of its business situation. The dividend is not considered important for investors in growth stocks, who view the company's business opportunities as being lucrative enough that free cash should be reinvested rather than paid out. Conversely, high dividend stocks, known as "widows and orphans" are considered to be companies in mature industries with steady income streams. The market's view is that there is little to be gained for such companies to reinvest their earnings. ecause of this, the opportunity for capital gains is limited, and investors will require the certainty of a…
No author. (n.d.). How and Why do Companies Pay Dividends. Investopedia.com. Retrieved June 18, 2008 at http://www.investopedia.com /articles/03/011703.asp' target='_blank' REL='NOFOLLOW'>
Dividends Received Deduction, or DRD is a tax deduction that is typically received by a corporation on the dividends paid to it by companies in which it has some form of ownership. The logic behind this is to reduce the consequences of what might be triple taxation. This triple taxation would occur because the company paying the dividend does this with after-tax money, and the receiving company is subject to income tax on the money received as dividend income. If the company that receives the dividend decides to pay out to the shareholder, then there is more tax obligation, or a single variable being taxed three times. For example, if a company owns less than 20% of another company, it can deduct up to 70% of the dividends it receives.
DRDs are designed to complement a consolidated return, which allows affiliated corporations the ability to file a single consolidated return.…
26 USC §63 -- Rules applying to deductions for dividends received. (2013). Legal Information Institute Cornell University Law School. Retrieved from: http://www.law.cornell.edu/uscode/text/26/63
26 USC §469 -- Rules applying to deductions for dividends received. (2013). Legal Information Institute Cornell University Law School. Retrieved from: http://www.law.cornell.edu/uscode/text/26/469
2004). The new Fed chairman would necessarily have to monitor inflationary pressures to prevent spikes in the cost of living. n this note the new Chairman would move from a policy of targeting core inflation which excludes the so called volatile food and energy prices, and focus on the headline rate which includes these components. Additionally the Consumer Price Index calculation would change to reduce the weight of housing in the index, "which makes up 41% of the typical consumer's budget" (Mankiw, G. 2004). More weight would be placed on those items which have steadily increased in price far above even the headline rate over the last decade: energy, food, health care, and education. These steps would help stabilize the dollar as a store of value for the consumer and investor.
The last selection criterion for the new chairman will be their belief in the purpose and efficacy of the…
On trade policy the administration strongly favors unfettered free trade between nations with reductions in tariffs, and the creation of compacts expanding access to global markets. "For more than two centuries economists have steadfastly promoted free trade among nations as the best trade policy" (Blinder, a.N.D.). The new administration will push for the immediate fast tracking of any trade pacts still on hold in Congress. Additionally the goal of establishing free trade alliances similar to NAFTA with all of the EU and Asia will be a strong priority.
On regulatory policy the Chair of the Council will need to embrace a policy of sound, logical, but limited regulation on business. The regulatory policy must be designed to ensure that consumers are protected however not impinge on the spirit of American entrepreneurship, risk taking, and profit maximization. Succinctly the administration "seeks more affordable, less intrusive means to achieve the same ends -- giving careful consideration to benefits and costs" (Obama, B. January 18, 2011).
The fourth piece of the economic policy puzzle is the administration's defense of a strong dollar policy. A weak and falling dollar robs the consumer
personal cash management policies and practices. The paper starts with by stating the methodology through which the content was collected for the relevant literature in the paper. The paper then presents a clear definition of what cash management is and presents an overview of some of the most utilized personal cash management practices. The literature review also presents numerous internal cash management policies and practices that can prove to be feasible and profitable on the personal level. The paper concludes with an overview of all the facts discussed.
In order to collect relevant data for the results, concise and yet comprehensive information related to the topic have been compiled from articles published online individual researchers, practitioners, as well as, international research institutions. The aim of the study is to critically review the strengths and weaknesses of both conception and implementation of research pertinent to our topic -- Cash…
Agarwal N.K. (2001). Analysis of Financial Management. National Publishing House, New Delhi.
Bari R.R. (2000). Cash Planning and Management, Triveni Publication, Delhi.
Bierman H.K. And Macdams, A.K. (2001). Managerial decision for cash and marketable securities, New York: Cornell University.
Chiumintto P.M. (2001). A Practical basis for Working Capital Management, in Doris William ed. Hand Book of Business Finance. New York: Prentice Hall.
Decentralization of Cultural Arts Funding
This is an essay discussing the decentralization of cultural arts funding. Essay is written as: I am the Executive Director of a state arts agency. The state has two large urban areas with surrounding suburbs, the rest is rural. The State Legislature, in response to constituents' complaints that too many state funds are being funneled to "elite cultural institutions in the cities" is considering instituting a decentralized funding strategy. I have been hired as a consultant to make a recommendation to adopt or refute a decentralized funding strategy. Discussed are the political and theoretical motivations behind the argument for decentralized arts funding. Also discussed are views on decentralization trends in arts funding and the potential effects on artists, arts organizations and arts audiences, the effects on rural, urban, and suburban areas are described, as well as ways this trend might affect the current system or…
American Canvas: The Evolving Cultural Landscape." National Endowment for the Arts. http://arts.endow.gov/pub/AmCan/Chapter3.html.(accessed07-20-2002).
Madden, Stephanie; Bowen, Missy. "Design for Success: Young
Aspirations/Young Audiences." http://arts.endow.gov/artforms/Design/YAYA.html.(accessed07-21-2002).
Thompson, Shirley. "Young Aspirations/Young Artists." http://www.newday.com/films/Young_Aspirations.html .(accessed07-20-2002.
aid President George W. ush in policy formulation. It is an all-inclusive paper dealing with a wide range of issues such as the American economy in general- discussing issues such as budget deficits, tax cuts, medical assistance and benefits for retired people, the weakening American dollar, allocations for the military, intelligence and homeland security, job growth and the regime and policies of free trade. With regards to security, it features the recent American initiate on the war on terrorism. The issue of Weapons of Mass Destruction (WMD) and nuclear proliferation are discussed quite at length.
Another aspect listed in the paper is the 'future', as it was viewed from the era of the Vietnam War. The relevance of the cold war is also outlined as a great American victory. Compelling issues such as the role of oil, OPEC, the Middle East and the socio-political and economic situation after the incidents…
Bush's tax cut' Retrieved from;
http://amateurpundit.hypermart.net/features107_bushtaxing.htm Accessed on March 5, 2004
Economy: Job Creation' Retrieved from;
http://ipsnews.net/africa/interna.asp?idnews=22469 Accessed on March 5, 2004
Apple: Borrower Analysis
The size of the loan that Apple (AAPL) is procuring is $6.5 billion dollars in corporate bonds (Colt, 2015) with the intention of raising another $1.6 billion through the sale of Australian currency bonds in the form of seven-year notes (Purvis, 2015). The intention of the loan is to lift share holder value through the increase of dividend payments while avoiding hefty tax payments by repatriating its stockpile of cash ($145 billion to be exact) held in offshore accounts (Ehrman, 2013).
Thus, this transaction is useful to Apple because it allows the company to maintain its significant cash reserves and to boost its stock price by giving investors greater incentive to buy. Some critics might argue that the loan does nothing to really boost the company's fundamentals (in terms of development projects) but in an age where fundamentals are increasingly insignificant (which is what happens when QE…
Colt, S. (2015). Apple just took out a $6.5 billion loan even though it's sitting on $178
billion in cash. Business Insider. Retrieved from http://www.businessinsider.com/why-apple-raised-65-billion-in-debt-2015-2
Ehrman, D. (2013). Does Apple need a loan for billions? Motley Fool. Retrieved fom http://www.fool.com/investing/general/2013/04/27/does-apple-need-a-loan-for-billions.aspx
Purvis, B. (2015). Apple raises $1.6 billion in record corporate bond deal. Bloomberg.
Distribution in Finance
A company has an obligation to maintain financial stability through engagement to its staff, clientele and the shareholders. It ensures this by laying down vital, strategic, financial plans. Cash distribution is a methodology in which a company can achieve this. It is often referred to as the distributions from a company presented to a limited partner investor from monetary resources and in the form of money. The limited partners have a percentage of shareholding in the company; hence, the latter maximizes the opportunities set in place in investing, capital structure and working capital policies. Companies distribute finances to their partners through several procedures that this context looks into; dividends and stock repurchases (Ehrhardt and Brigham, 2008, pg 515).
Overview of Cash Distribution
Cash available for distribution to its investors is derived from operations being carried out in the company (Brigham and Ehrhardt, 2010, pg 560). Decision-making in…
Asquith, P and Mullins, D.W. (2006). Signaling with Dividends, Stock Repurchases, and Equity Issues. Financial Management. Vol 15, Issue 3. Pg 27-44.
Brigham, E. F and Daves, P.R. (2009). Intermediate Financial Management. New York: Cengage Learning.
Brigham, E. F and Ehrhardt, M.C. (2010). Financial Management Theory and Practice. New York: Cengage Learning.
Brigham, E. F and Houston, J.F. (2009). Fundamentals of Financial Management. New York: Cengage Learning.
United Technology Corporations in regard to its strategies, financial performance and general stock performance. The conglomerate's strategy and positioning is presented in regard to its various constituent firms. A conclusion is provided on the basis of the obtained financial outlook.
Financial performance and strategy
Capital markets considerations
UTC's financial and investor ratios
Price to Operating Profit (P/OP)
Price to Book Value (P/BV)
UTC's corporate strategy and positioning
United Technologies Corporation (UTC) is an American multinational conglomerate that has its headquarter in the United Technologies Building which is located in Hartford, Connecticut (UTC,2011).The company deals in research, development as well as manufacture of cutting-edge technology products in various areas such as aircraft engines, HVAC, fuel cells, helicopters, escalators and elevators, fire equipment, security, industrial products, and building materials among other products. The company is a major U.S. military contractor (Stewart, 2005, p.2) for which it produces missile systems as well as…
Bern, MD (2011).Enhanced Income strategies for United Technologies
Cota, E (2011). United Technologies Corp: cash flow valuation http://seekingalpha.com/instablog/817168-eric-cota/191938-united-technologies-corp-cash-flow-valuation
Dividendvalue (2008). Stock Analysis: United Technologies Corp (UTX) A Buy At This Pricehttp://dividendsvalue.com/1433/stock-analysis-united-technologies-corp-utx-a-buy-at-this-price/
The company seeks to align its core strengths with the Quadrennial Defense Review that sets the course for the country's security initiatives for the coming four years as a means to increase its share of defense contracts (2009 Annual Report). Thus, the company's strategic initiatives are driven by what it expects government defense policy will be in the coming years. As of the fall of 2009, the company did not believe that it had any major holes in its competencies or product offerings that it needed to address (Ratnam, 2009). This is perhaps why Northrop Grumman is focused on internal improvements -- it feels that the company's existing structure, businesses and strengths are sufficient to sustain its size and to build market share in defense contracts. The company has not indicated any desire to seek out new customers in its recent communications.
Policies and Practices
Northrop Grumman's capital structure has…
Datamonitor. (2009). Northrop Grumman divests TASC business for $1.65 billion. Trading Markets. Retrieved May 24, 2010 from http://www.tradingmarkets.com/.site/news/Stock%20News/2645115/
Hedgpeth, D. (2010). Q&a with Northrop Grumman chief executive Wes Bush. Washington Post. Retrieved May 24, 2010 from http://www.washingtonpost.com/wp-dyn/content/article/2010/04/29/AR2010042903716.html
MSN Moneycentral: Northrop Grumman. (2010). Retrieved May 24, 2010 from http://moneycentral.msn.com/detail/stock_quote?symbol=NOC&ww=1
Northrop Grumman 2009 Annual Report. Retrieved May 24, 2010 from http://www.northropgrumman.com /pdf/2009_noc_ar.pdf' target='_blank' REL='NOFOLLOW'>
This make it easier to finance firm operations by selling stock, but on the other hand the firm can be forced to pay shareholders when it needs the cash to finance its debt, invest in new projects, or simply to pay for its daily activities without going further into debt.
The final method is that of a hybrid method. Dividends are paid on a stable basis. But over the long-term, the debt-to-equity ratio is reviewed, and if the firm is regularly coming short on paying its debts and other expenses, payments to shareholders may be curtailed (How and why do companies pay dividends, 2010, Investopedia). This is the preferred method, given the added flexibility it offers the firm. Hybrid methods have the ability to ensure the firm's long-term financial health, as payments can be curtailed in times of sustained economic hardship -- but hybrid payments still offer stable returns for…
Baker, Kent H., Tarun K. Mukherjeel, Gary E. Powell (2005, Summer). Distributing excess cash:
the role of specially designated dividends. Financial Services Review.
Retrieved October 11, 2010 at http://findarticles.com/p/articles/mi_qa3743/is_200507/ai_n14685355/?tag=content;col1
How and why do companies pay dividends? (2010). Investopedia. Retrieved October 11, 2010 at http://www.investopedia.com /articles/03/011703.asp' target='_blank' REL='NOFOLLOW'>
Introduction & Recent History
Ryanair is a leading discount airline based in Dublin. The company is known for its cost leadership strategy that has included some attention-getting publicity stunt ideas, and some that the company has actually implemented. The company is profitable, earning €544 million in the first half of fiscal 2012 and €400 million in fiscal 2011. The company flies low-cost scheduled flights around Europe and to nearby destinations in the Mediterranean regions. Ryanair was first mover in its industry, but now faces competition from a number of other budget carriers.
In its reports, the company outlines some of the factors that have an impact on the financial statements. One of its major hubs is in Dublin, and that airport has increased fees substantially of late, making that airport less viable for all airlines. Fuel costs have risen 37pc in the past six months, squeezing the company's margins.…
Areddy, J. & Galbraith, A. (2011). Ryanair trumpets airplanes from China. Wall Street Journal. Retrieved December 1, 2011 from http://online.wsj.com/article/SB10001424052970204262304577067951924584354.html
Financial Times. (2011). Bonds & rates. Financial Times. Retrieved December 1, 2011 from http://markets.ft.com/research/Markets/Bonds
FTSE (2007). FTSE all-share index 10-year performance (GBP total return). Retrieved December 1, 2011 from http://docs.google.com/viewer?a=v&q=cache:BaNQpNQ7lokJ:www.ftse.com/Indices/UK_Indices/Downloads/FTSE_All-Share_Index_Historical_Factsheet.pdf+FTSE+historical+return&hl=en&gl=us&pid=bl&srcid=ADGEESjGpTzDl4SpsTsCXgNX8MO2Iraw3WYv9h4ga1MtPTSq5hTBhDiT1hBzU0N_bmVjnEF4lRHTcNdM1d2u8t1cuokHy72uwB0mqtiFsa4NymfFz3Dwuiq5pRRq0Z5wktvFX1Cyz5bU&sig=AHIEtbRyche-12QJJYxGlLMAHZzI-QuXLA
Galbraith, A. (2011). Ryanair CEO: Gulf shake-up may prompt low-cost trans-Atlantic flights. Wall Street Journal Retrieved December 1, 2011 from http://blogs.wsj.com/source/2011/11/30/ryanair-ceo-gulf-shake-up-may-prompt-low-cost-trans-atlantic-flights/
There may be dramatic differences in the Beta on other stock exchanges. In this case, one must be certain of what comparison is being made. In addition, differences in currencies may produce different results. The beta, in this case, is not a reliable means of assessing company performance. However, it can be valuable from the standpoint that it reflects the connection between andstad and it dependence on the global economy.
The Shareholder Value Added approach defines value as the corporate value, less the value of debt. It focuses on the change in value over time. It is usually calculated for several periods of time, using he debt and equity in each period. However, like the other methods, it becomes less accurate over the long-term. The more distant it becomes from the event, the less accurate this method tends to be.
Each of the valuation methods mentioned earlier has drawbacks in…
Google Finance. 2009. Randstad Holding nv. [Online]. (Updated June 26, 2009). Available at: http://www.google.com/finance?q=AMS:RAND [Accessed June 28, 2009].
Hoover's. 2009. Randstad Holding. Available at: http://www.hoovers.com/randstad-holding/--ID__93213,ticker__RAND -- /free-co-fin-factsheet.xhtml [Accessed June 27, 2009].
Kanner, J. & Van de Pol, J. 2007. Randstad May Offer to Buy Staffing Company Vedior. November 30, 2007. Bloomberg.com. Available at: http://www.bloomberg.com/apps/news?pid=20601087&sid=ag3CnzqhPf0g&refer=home [Accessed June 27, 2009].
Randstad Annual Report. 2009. Annual Report 2008. Investor Relations. [Online]. Available at: http://www.randstadannualreport.com/investor-relations-randstad-shares.html [Accessed June 25, 2009].
The FCF-based valuation model is based on the following formula:
EBIT (1-Tax Rate) + Depreciation & Amortization - Change in Net orking Capital - Capital Expenditure
is the free cash flow each year, C0 is the original cash outlay, and r is the discount rate. The free cash flows in this type of calculation are only those cash flows that are incremental to the investment decision. Thus, they do not include such non-cash items as depreciation or amortization expense, and they do not include either sunk costs or non-incremental flows like overhead allocations. The r is the discount rate, and the firm can select its discount rate from a number of different options. The most common, and arguably logical, is the firm's weighted average cost of capital. This reflects the firm's cost of equity, its cost of debt and its capital structure, with allowances for preferred shares…
Berkman H., Bradbury, M. & Ferguson, J. (2002). The accuracy of price-earnings and discounted cash flow methods of IPO equity valuation. Journal of International Financial Management and Accounting. Vol. 11 (2) 71-83.
Del Vecchio, J. (2000). Dividend discount model. Motley Fool. Retrieved April 27, 2012 from http://www.fool.com/research/2000/features000406.htm
Demirakos, E., Strong, N. & Walker, M. (2004). What valuation models do analysts use? Accounting Horizons. Vol. 18 (4) 221-240.
Francis, J., Olsson, P. & Oswald, D. (2000). Comparing the accuracy and the explainability of dividend, free cash flow and abnormal earnings equity value estimates. Journal of Accounting Research. Vol. 38 (1) 45-70.
The leadership personnel of the companies were far more affected by this merger, and there is no evidence that this merger was viewed as anything but a positive move for both companies by these individuals (Coffee 2006; Taft & Musich 2006; Knorr 2006). The cash premium that was paid to Mercury Interactive shareholders and the ongoing increase in price for Hewlett Packard stock following the merger makes it likely that shareholder response to the merger was equally positive (Google Finance 2010; Hewlett Packard 2006a).
Many mergers, especially in the past decade of increased scrutiny of accounting methods and financial reports, are quite complex and time consuming. The merger between Hewlett Packard and Mercury Interactive, however, was accomplished with a great deal of simplicity and efficiency. Though the primary benefits to both companies were found in the boosted assets, market share, and operational scope of the merged entity, the efficiency…
Boardman, B. (2006). "Merging for muscle." Network Computing, 17(6), pp. 16.
Coffee, P. (2006). "HP-Mercury: Modules to monoliths." eWeek 23(3), pp. 18.
Google Finance. (2010). "HPQ." Accessed 27 October 2010. http://www.google.com/finance?client=ob&q=NYSE:HPQ
Harkiolakis, N. & Mourad, L. (2009). "Preserved Valuation Measurements in Mergers and Acquisitions of Similar Size Corporations." In Recent Advances in Management, Marketing, Finance. Penang, Malaysia: WSEAS Press. Accessed 27 October 2010. http://184.108.40.206/scholar?q=cache:kSabfbC1VpcJ:scholar.google.com/+hp+mercury+interactive+merger&hl=en&as_sdt=1
Apple Inc. Investment Analysis and Recommendations
Apple Inc. is an American multinational company specializing in designing and producing mobile telecommunication devices that include iPhone, computer software and hardware, Apple TV, Apple Watch, iPod, and other electronic devices. Apple was incorporated and publicly registered in 1977. Headquartered in California, Apple is one of the most successful American companies in term of revenue with the annual revenue reaching $233.7 billion at the end of 2015 fiscal year. On February 2016, Apple recorded $521.3 billion worth of market capitalization. While Apple designs the bulk of their products in the United States, the company's manufacturing plants are located in China. Apple also operates in Europe, Japan, Canada, and Latin America. (Apple Inc. 2015).
Board of Directors
Apple Inc. Board of Directors is overseeing by the company CEO (Chief Executive Officer) and other competent senior management. The Board oversees the day-to-day operations of the company…
ith Domino's UK, the company has in its annual report and in its press releases outlined its future expansion plans. There are figures readily available with respect to trends in its same store growth and with respect to its dividend policy. All of these factors should, in theory at least, be included in the current share price. The first step in valuing the company will be to ensure that this is the case.
Given that the price of the company today is expected to be the fair value of the company's future earnings, an acquiring firm would need to consider in its valuation the worth of Domino's as part of its operations. Thus, a bid would need to be done on the belief that its acquisition of Domino's would make Domino's more valuable than it already is. This is the concept of synergy, defined as "the specific increases in performance…
Damodaran, a. (2005). The value of synergy. Stern School of Business working paper. Available at SSRN: http://ssrn.com/abstract=841486
Domino's Pizza Annual Report and Accounts 2009. In possession of the author.
Domino's press release. (2009). Domino's launches 'store on wheels' to deliver pizza at top UK events. Domino's UK & IRL plc. Retrieved April 29, 2010 from http://www.dominos.uk.com/media_centre/pdf/Mobile%20unit%20090609.pdf
Domino's UK & Ireland Investor Relations. (2010). Financial Performance. Domino's UK & Ireland Investor Relations. Retrieved April 29, 2010 from http://ww7.investorrelations.co.uk/dominos/financial/index.jsp
Google & Microsoft
Google is the leading search engine in the world, and has used the revenues from this position to both expand on its search capabilities and to enter new businesses as well. Google's main search engine is the world's most-visited website (Alexa.com, 2012). This brand has been expanded both geographically and across multiple product line extensions. The brand is the number one search engine in most major markets, the exception being China where cultural differences and legal troubles have allowed competitor Baidu to become market leader and the world's #5 website. (Li & omack, 2012). Product extensions include Maps, Translate, Scholar, Books, Images, Video and other similar search-related websites. Google also owns Blogger, one of the world's leading blog sites. Additionally, Google has enjoyed strong growth in recent years as the result of its Android mobile operating system. Android has become the world's largest mobile operating system, with…
Alexa.com. (2012). Top sites global. Alexa.com. Retrieved March 6, 2012 from http://www.alexa.com/topsites/global
Choney, S. (2011). Android market share to surpass 40% this year. MSNBC Tech. Retrieved March 6, 2012 from http://www.technolog.msnbc.msn.com/technology/gadgetbox/android-market-share-surpass-40-percent-year-122857
Google 2010 Annual Report. Retrieved March 6, 2012 from http://investor.google.com/pdf/2010_google_annual_report.pdf
Investopedia Staff. (2009). Reading the balance sheet. Investopedia. Retrieved March 6, 2012 from http://www.investopedia.com /articles/04/031004.asp' target='_blank' REL='NOFOLLOW'>
easyJet Financial eporting
ecent History egarding Corporate Accounting Policy
The recent corporate accounting practices of easyJet Airlines reflects financial accounting policies at the company, which were in disapproval by Sir Stelios Haji-Ioannou, founder -- easyJet (Waller, 2008) . The Board of Directors are responsible for drafting and adopting of company accounting policies. Sir Stelios' rejection of the boards annual accounts is reflective of the agency/principle problem such that the board is now potentially viewing the corporation in a different light than from the founder.
The founder proclaimed the accounting policies adopted by the board of easyJet to be inaccurate and not reflective of the "current commercial realities and the macro-economic climate" says Sir Stelios (Waller, 2008). Stelios recommends changes to the policies in place and suggests appointment of two directors of non-executive capacity to serve on the board to provide financial accounting insight into the policies established and set forth…
"A new departure for EasyJet with Airbus," 2003, FT.com,, pp. 1.
EasyJet Annual Report (2010). http://2010annualreport.easyjet.com/files/pdf/ConsolidatedFinancialPosition_easyJet_AR10-3-5.pdf
EasyJet Resolves Dispute With Founder 2010,, Dow Jones & Company Inc.
"Filling the gaps with a new SAFETY EVENT," 2004, The Safety & Health Practitioner, vol. 22, no. 10, pp. 78.
However, the company saw a reduction in profits during 2008 (fiscal 2009) and only last year was able to restore profitability to previous levels. Target therefore appears to be less recession-proof than al-Mart, and this may be related to the latter company's superior geographical diversification.
Both companies have healthy balance sheets. al-Mart's tight margins meant that it traditionally has what in some companies would be considered poor liquidity (current ratio below 1) but in general al-Mart has a stable balance sheet. The company's capital structure is debt-oriented, with 62% liabilities. Target is a much smaller company than is al-Mart, with assets only one-quarter those of the Arkansas giant. Target has healthier liquidity but as with al-Mart maintains a debt-heavy capital structure of 64.5% liabilities.
At the most basic level, both of these firms represent good investments. They are strong firms with healthy balance sheets and the ability to continue to…
MSN Moneycentral: Target. (2011). Retrieved April 5, 2011 from http://investing.money.msn.com/investments/stock-price?Symbol=TGT
MSN Moneycentral: Wal-Mart. (2011). Retrieved April 5, 2011 from http://investing.money.msn.com/investments/stock-price?Symbol=WMT
Pike and Neale (2006, p.454) peg the impact to the return shareholders require on their investments (ke) -- if ke is lower than the expected return on the new investment, the dividend cut has a positive impact on organizational value; if ke is higher than the OI on the new investment project, the impact is that of decreasing the firm's value; finally, if the two ratios are similar, the impact is neutral.
g) Pros and Cons of Mitilin Bros Takeover
Arguments in favor:
Diversification of activities and incomes, which translates into lower levels of risk
Access to a wider customer market
Benefits derived from the extensive expertise of the managerial team at Mitilin Bros
Increases in income and the gaining of a stronger competitive position
From a theoretical standpoint, the acquisition of Mitilin would be beneficial due to its ability to "ensure management accountability, offer easy growth opportunities, create…
Calamos, N., 2003, Convertible Arbitrage: Insights and Techniques for Successful Hedging, John Wiley and Sons, ISBN 0471423610
Damodaran, a., 2002, Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 2nd Edition, John Wiley and Sons, ISBN 0471414905
Evatt, B., Adopt an Optimal Capital Structure to Improve Shareholder Value, Burleigh Evatt, Retrieved from http://www.burleighevatt.co.nz/Document.aspx?Doc...pdf on September 9, 2009
Fabozzi, F.J., Peterson, P.P., 2003, Financial Management and Analysis, 2nd Edition, John Wiley and Sons, ISBN 0471234842
However, it would be safer to follow general policies that are being followed even now. This means that one should pass on published information to shareholders on the Internet as it would be simpler and less expensive to send. This may include information about quarterly results, monthly turnover, changes of directors, appointment of new sales agents, general trends of markets at certain times, etc. The question would still remain as to how many shareholders would be competent enough to use this information and the passing on of information may result for the clients as an exercise of garbage in, garbage out.
5. Discuss the legal boundaries, including privacy issues. What exceptions if any exist to allow for the use of such data? If they do not exist, how would you counter the privacy advocates concerns?
Some experts believe that privacy concerns will ultimately reduce the growth of the Internet generally…
Insider Trading" U.S. Securities and Exchange Commission. Retrieved at http://www.sec.gov/answers/insider.htm . Accessed 15 October, 2005
Is Government needed to watch online markets?" (11 November, 2002) Harvard Business
School. Retrieved at http://searchcio.techtarget.com/originalContent/0,289142,sid19_gci864459,00.html . Accessed 15 October, 2005
Ivancevich, Susan; Jones, Lucian. C; Keaveney, Thomas. (December, 2002) "Don't Run the Risk" Journal of Accountancy. Retrieved at http://www.aicpa.org/pubs/jofa/dec2002/ivance.htm . Accessed 15 October, 2005
A preview of capital structure issues
In regards to the overall business environment, capital structure has profound implications of the business, irrespective of its industry. For one, a firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $40 billion in equity and $160 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example is referred to as the firm's leverage. This leverage has implications on the entire firm. For example, leverage in many respects is a double edges sword. On one hand, leverage can amplify gains for firms. However, if used incorrectly, leverage can also amplify loses. As such, firms must be cognizant of its capital structure as complacency can hinder overall business performance. Debt and equity financing, can have a profound implications on the…
1) Myers, Stewart C.; Majluf, Nicholas S. (1984). "Corporate financing and investment decisions when firms have information that investors do not have." Journal of Financial Economics 13 (2): 187 -- 221
2) Baker, Malcolm P; Wurgler, Jeffrey (2002). "Market Timing and Capital Structure." Journal of Finance 57 (1): 1 -- 32.
3) Lyandres, Evgeny and Zhdanov, Alexei, Investment Opportunities and Bankruptcy Prediction (February 2007) Available at SSRN: http://ssrn.com/abstract=946240
4) Timmer, Jan (2011). Understanding the Fed Model, Capital Structure, and then Some.
Rio Tinto faces a competitive market, but has concluded some important deals, including a very large one in Guinea, and a mergers and acquisitions campaign that gives it a strong asset base. The company has a strong commitment towards sustainable development, including in the environmental, social and corporate governance fields. This can be an advantage when discussing new deals with foreign governments.
However, there are several elements that also need to be taken into consideration when making the final decision and that moderate the buy action. The company is active in a difficult external environment, where political and legal risks can always play a negative impact on an investment. The financial figures and the stock performance are positive and sustainable, but there is concern about a growing financial leverage in the future and a fluctuating stock price (although, this would be a good moment to buy,…
1. Harvey, Charles E. (1981). The Rio Tinto Company: An Economic History of a leading international mining concern, 1873 -- 1954. Alison Hodge Publishers. pp. 10 -- 11
2. About Rio Tinto. On the Internet at http://www.riotinto.com/aboutus/about-rio-tinto-5004.aspx . Last retrieved on May 19, 2014
3. Yahoo! Finance. On the Internet at http://finance.yahoo.com/echarts?s=RIO+Interactive#symbol=RIO;range=5y . Last retrieved on May 19, 2014
4. The Telegraph. On the Internet at http://shares.telegraph.co.uk/fundamentals/?epic=RIO . Last retrieved on May 19, 2014
The primary reason to own Altria is its dividend. The current dividend, $1.28 per year, results in a dividend yield of 8.34%. Given that Altria's EPS is only $1.54 per year, it is evident that the company pays out most of its profits to its shareholders. Despite the declining business, the company is well-positioned to maintain relatively stable revenue streams that will enable it to maintain this dividend. As a result, the company is suited more for long-term income investors than for short-term investors driven by capital gains. Altria's slow growth, difficult operating environment and other challenges make it a poor buy for investors seeking anything other than a relatively stable income stream.
Apple (Nasdaq: AAPL) is a designer, manufacturer and marketer of computers and related paraphernalia, both hardware and software. The firm markets desktop computers, laptop computers, portable music players (iPod), portable communications devices (iPhone) and the software…
Company financials from Reuters. Retrieved December 13, 2008 at http://www.reuters.com/finance /stocks/overview?symbol=AAPL.Oand
The financial manager of a firm deals specifically with the acquisition, financing, and management of assets with the overall financial security and profitability of the firm as his goal. Decisions concerning what are the best types of financing, the best financing mix; the appropriate dividend policy and how the funds will be physically acquired are all the responsibility of the financial manager. The financial manager has different degrees of operating responsibility over the firm's assets with a greater emphasis on current asset management rather than fixed asset management.
Responsibilities of the financial manager also include capital budgeting, cash management, credit management, dividend disbursement, financial analysis and planning, pension management, insurance/risk management, and tax analysis and planning through cost accounting, cost management, governmental reporting, internal control, the preparation of financial statements, and preparing budgets and financial forecasts.
The overall goal of the firm is the maximization of shareholder wealth and…
building industry. The building industry is a cyclical business based on residential and business construction. The industry has faced several years of constrained demand, despite low interest rates. Two firms within the industry are Eagle Materials (EXP) and Apogee Enterprises (APOG). These two firms will be compared with one another in terms of their finances and their recent news in this paper. First, Eagle will be studied including its key financial ratios and recent news, and then the same treatment will be given to Apogee. The conclusion of the paper will discuss the future of the industry and which of the two firms would make a better investment for someone looking to put money in the building industry today.
The Building Industry
The building industry is a cyclical business based on construction. Both construction firms and their suppliers are part of this industry. The two companies being studied are industry…
Apogee Enterprises Form 10-K for the fiscal year ended 2012.
Eagle Materials Fiscal Year 2012 Form 10-K.
Eagle Materials. (2013). Eagle Materials Inc. reports continued growth in sales volumes and earnings in the third quarter. Eagle Materials Retrieved March 30, 2013 from http://ir.eaglematerials.com/releasedetail.cfm?ReleaseID=738571
Forbes. (2013). Apogee Enterprises about to put more money in your pocket. Forbes Dividend Channel. Retrieved March 30, 2013 from http://www.forbes.com/sites/dividendchannel/2013/02/01/apogee-enterprises-about-to-put-more-money-in-your-pocket/
("Gates, Bill," 2007) the company is in fact considered a regional financial backbone, in the Seattle-edmond area where its world headquarters are. The whole region and to some extent the whole world takes notice when Microsoft announces financial strategies and changes or when stocks rise or fall.
The software maker said it would buy back $20 billion through a tender offer set to be completed on Aug. 17. The company said that its board of directors has also authorized the company to buy back up to $20 billion worth of stock through June 2011. The company said it has completed the $30 billion stock buyback announced two years ago. "With our share repurchase programs announcement today, we reaffirm our confidence and optimism in the long-term future of the company and continue to execute on our strategy of returning capital to shareholders," Microsoft Chief Financial Officer Chris Liddell said in a…
Bolten, S.E. (2000). Stock Market Cycles: A Practical Explanation. Westport, CT: Quorum Books. Retrieved August 29, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=29180460
Fried, I. (July 20, 2006) Microsoft plans massive stock buyback, CNET News
Gates, Bill. (2007). In the Columbia Encyclopedia (6th ed.). New York: Columbia University Press. Retrieved August 29, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=112860479
Soliciting funding for a company investment is normally an uphill task for the company. The ideal company must convince the investors that it can repay the money. For this reason, there is a necessity to determine the company's capital structure. Capital structure guides the company agitation on funding. In fact, through the capital structure, the company achieves debt capital, equity capital, and other hybrid securities like vendor financing. The commencing report will examine Microsoft Capital structure. The report will prove that Microsoft can achieve a coherent financial liberation if it pursues capital-funding mechanisms that are investment conscious.
Microsoft Capital Structure
Microsoft capital structure comprises of residual distribution model in practice. Berg Aspelund and Sorheim (2008, pp. 33) joins this analysis by arguing the residual distribution facilitates determination of estimates returns and investment. Microsoft assesses its opportunities assessed on the average for the next five years. In addition, the…
Berg, M.S., Aspelund, A., & Sorheim, R. (2008). The hybrid structures of international new ventures: A social capital approach and research agenda. The International Journal of Entrepreneurship and Innovation, 9(1), 33-42.
Bertomeu, J., Beyer, A., & Dye, R.A. (2011). Capital Structure Cost of Capital, and Voluntary Disclosures. The Accounting Review, 86(3), 857-886.
Porteous, B.T., & Tapadar, P. (2008). The Impact of Capital Structure on Economic Capital and Risk Adjusted Performance. ASTIN Bulletin, 38(1), 341-380.
Wang, S. (2010). An Application of Fuzzy Set Theory to the Weighted Average Cost of Capital and Capital Structure Decision. Technology and Investment, 01(04), 248-256.
" Bhattacharya (1988). It is used to calculate the value of a company based on its total cash flow. (oss, 1988).
Bhattacharya (1998) states that this theory assumed that lower dividends will lead to reduced levels of new equity and this will bring about a balance between the debt and equity of a company. This is not ture for utilities companies and other monopolistic firms where new equities are rare.
For the "Current Examples" in our table, do we need to find specific company examples that exist today or have happened in the last 2-3 years? Or will it suffice to give a theoretical example of a measurement in a firm that fits the model.
For example, would this be OK.
Efficiency Theory Example
- Production returns based on shared, variable, and per unit costs divided by the total output of a factory in a given period of time.
Chew, DH (Ed.). (2001). The new corporate finance: Where theory meets practice (3rd ed.). New York, McGraw-Hill Irwin.
Copeland, T. & Weston, J.F., (1988). Financial theory and corporate policy (3rd ed.). Reading, MA. Addison-Wesley Publishing Company.
Fabozzi, R., & Modigliani, F. (1996). Capital markets institutions and instruments (2nd ed.). New Jersey, Prentice Hall.
Fama, E. And K. French. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay," Journal of Financial Economics, 60, 3-43
As such, their may be little money to invest in expansion, organic growth, acquisitions, and so forth. This can potentially be a detriment to the company as they may be unable to pursue business initiatives that may otherwise increase earnings and profitability of the firm. By not pursuing these initiatives, the company is actually limited its overall amount of growth as the company can not fully invest in strategic initiatives.
3) Yes, the company can issue common stock to the lawyer. To determine the price of the common stock, the owners should use a discounted cash flow analysis. Both Curtis and Natalie must estimate how much the future cash flows of the business are worth, today (uback, 1995). In this instance, both Curtis and Natalie can project out the earnings of the company over the coming years (5-10 years). As they project the possible earnings of the business, they can…
1) Pablo Fernandez. 2004. Equivalence of ten different discounted cash flow valuation methods. IESE Research Papers. D549
2) Ruback, R.S., 1995, an Introduction to Cash Flow Valuation Methods, Harvard Business School Case # 295-155.
Over the last several years, the markets have faced a tremendous amount of volatility. Part of the reason for this, is because the global financial crisis and subsequent recession caused the Dow Jones Industrial Average to decline to 6,547. Then, it would climb over 68% to cross above 12,000. This is important, because it is showing how there are tremendous opportunities for investors. However, in order to attain above average returns requires that you are using a strategy that is: embracing growth and minimizing risks as much as possible. To achieve this objective requires having: an asset allocation strategy that will incorporate balance and value. Once this takes place, it will provide the greatest insights as to how we should structure a portfolio that will maximize the total return investors are receiving in the year ahead.
The Portfolio Philosophy
The basic strategy that we will be using is to…
The China Fund. (2011). Yahoo Finance. Retrieved from: http://finance.yahoo.com/q/ks?s=CHN+Key+Statistics
Fidelity U.S. Treasury Money Market Fund. (2011). Fidelity. Retrieved from: http://fundresearch.fidelity.com/mutual-funds/summary/31617H300
Sander, P. (2011). The 100 Best Stocks. Adams, MA: Avon Media.
Standard and Poor's. (2010). Standard and Poor's 500 Guide. New York, NY: McGraw Hill.
Another factor that should be taken into consideration is that of overall strategy. Financial statements are snapshots, and sometimes it can be difficult to discern from looking at a small sample of them the firm's overall direction. Key strategic decisions can have a significant impact on the financial statements for a limited period of time. For example, during the period studied FedEx was having trouble absorbing Kinko's which it had purchased. These difficulties are not fully reflected on the income statements for 2005 and 2006. Instead, they appear as an unusual item (a writedown) in 2008. Likewise, UPS took a $6.1 billion writedown in 2007, which made the financial figures for that year look terrible. There is always strategic context in financial statements. That context is not always readily apparent, but it should be taken into consideration when analyzing the financial statements.
The potential impact of mergers and acquisitions should…
In the case of 'ridge Quay Pasta Palace', the current ratio is obviously too high. Indeed, the value has gradually decreased since 2006, but its value is still significantly high. In 2006, the current ratio was 5.69, which is more than 5 times the recommended value of the current ratio. In 2007 and 2008, this has decreased to 4.10 and 4.22 respectively, still significantly above 1.
Looking at the company's balance sheet, the problem seems to be with the accounts receivable and the conclusion that can be drawn is that the company is not collecting its money efficiently. Given the nature of activity of this company, as a restaurant, one can understand that, perhaps, the management is not collecting all dinner bills or something similar. However, the conclusion is that this is something that affects its short-term financial stability.
The quick test, calculated in a similar manner, but removing the…
1. Keown, Arthur; Martin, John; Petty. William. Foundations of Finance. Fifth Edition. Pearson Prentice Hall. 2006.
2. Hoggett, Edwards & Medlin. Accounting. John Wiley and Son. Australia, Ltd. Singapore. 2006
Keown, Arthur; Martin, John; Petty. William. Foundations of Finance. Fifth Edition. Pearson Prentice Hall. 2006.
Hoggett, Edwards & Medlin. Accounting. John Wiley and Son. Australia, Ltd. Singapore. 2006
Economy (Maket) Analysis
Bief Histoy of the Company
Analysis of Financial Statements (Ratio analysis)
Liquidity Ratios: Cuent atio
Opeating Efficiency: Asset Tunove
Opeating Pofitability Ratios: Net pofit magin, Retun on Equity, and Du Pont
Risk Analysis: Business Risk and Financial Risk, Vaiability, and Debt/Equity
Application of CAPM and Analysis
10F.Estimating the Value of the Company and Analysis
11• Sustainable Gowth Rate
12• Investment Decisions
13G.Additional Measues of Relative Value and Analysis
14H.Measues of Value Added and Analysis
15I.Comments and Conclusion
1.Economy (Maket) Analysis
Consume spending poved vey esilient against the challenge of gadually ising enegy pices, as indicatos of sales in the etail secto show. Howeve, the difficulties caused by huicanes Katina, Rita and othe topical stoms, as well as tensions in oil-ich aeas might lead to ecod-high enegy pices.
1. Morningstar report on Coach Inc.- www.morningstar.com
2. Investopedia - www.investopedia.com
3. Value-Based Management www.valuebasedmanagement.net
4. The Coach 10k form, publicly available (including the Internet)
financial break even point?
Given the incomplete data, it is hard to quote any specific figure. Elements that need to be conidered include the amount of workers that the agenyc employs, the calibre and brand of tools that they purchase as well as the details of other 'material' and quality and quanitty of this material.
Their location needs to be considered; their amount of rental; expense for utilities; travel expense, detials of office equiqment, and so forth. Only once these and related information is known can one figure out the financial break even point that the agency needs to make in order to make a profit.
What is the source of investment capital?
The company partners with financial and real estate corporation will invest in agency.
How will you use financial information to craft a business strategy?
Financial information will be used in both self-evaluation of organization and competitor analysis,…
NetMBA. Financial ratios http://www.netmba.com/finance/financial/ratios/
Lamb, Robert, Boyden Competitive strategic management, Englewood Cliffs, NJ: Prentice-Hall, 1984
oyal Dutch Shell PLC and Its Edge on the Global Market
The concept of financial analysis is a core indicator of the actual financial health of a given organization. The development of an accurate and dependable conceptual framework to be employed in the analysis of the global and corporate financial system has for quite a long time been an important issue in corporate accounting (Bodie & Merton,1990). An appropriate conceptual framework must be able to meet two main objectives: to effectively address the differences that exists in the institutional structures as well as to explain the main changes in the institutional structures over time. A review of extant literature has been dedicated to the concept of financial analysis. Most of these studies have dwelt on financial ratios. A study by Nenide, Pricer & Camp (2008) indicated that extant literature in accounting as well as finance indicate that the application of…
Chemical Market Reporter (2001) Energy markets poised for dramatic change, Chemical Market Reporter, 260(17), p. 8.
Datamonitor (2006). Royal Dutch Shell PLC.
Duval, Y (2005). Primary Data Collection Methods: Survey Design. ARTNeTCapacity Building Workshop on Trade Research Bangkok, Thailand, 22-25 March 2005
CEO's salary, bonus, and long-term compensation with respect to various organizational, financial and CEO factors such as corporate reputation, growth in employees, company size, and return on equity, CEO tenure and CEO stock ownership. In relation to the general performance of the organization
This paper utilizes the various measurement of chief executive compensation as exploited by the various detailed pieces of literature and employed as the dependent variable in a model based on multiple regression theory. It explores the extent to which the CEO's compensation package affects the overall performance of the whole firm or corporation for which he or she works for.
The purpose of this research is to determine the extent to which the CEO's remuneration a large corporation such as Coca Cola has on the general performance of the organization.
The CEO's compensation has for a long time been source of attention from various groups in…
Anderson, R.C & Bizjak, J.M. 2003) An Empirical Examination of the Role of the CEO and the Compensation Committee in Structuring Executive Pay.Journal of Banking and Finance, 27.
Baiman, S. And Verrecchia R. (1995).Earnings and price-based compensation contracts in the presence of discretionary trading and incomplete contracting. Journal of Accounting and Economics, Vol. 20:1, pp. 94-120.
Barro, J.R.; Barro, R.J. (1990) Pay, Performance and Turnover of Bank CEOs, Journal of Labor Economics, 8.
Bebchuk, L.A & Fried, J.M.( 2003) Executive Compensation as an Agency Problem. National Bureau of Economic Research Working Paper Series, No. 9813.
Investments and the Irrelevance Proposition
The expected rate of return on an investment is calculated by taking the expected return and dividing it by the amount invested. If there is a return of $6 on an investment of $100 the rate of return is 6%.
When a customer states they are unhappy with this return, and it is suggested that they borrow $90 to help pay for the investment, which has an interest rate of 4%, the broker is suggesting that the investor goes from an unleveraged position where there is no borrowing, to a highly leveraged position, where there is a high level of borrowing.
Looking at the effect this will have on the investment the first consideration is to look at the investment itself; if the investor borrows $90 and invests $10 of their own, there is still a total investment of $100, and the return for…
Baye Michael, (2007), Managerial Economics and Business Strategy, McGraw-Hill/Irwin
Miller, M. H, (1991), Financial Innovations and Market Volatility, Cambridge, Massachusetts: Blackwell Publishers
In order to analyze the financial stability and health, several important liquidity and debt ratios are necessary. The current ratio, comparing the current assets to the current liabilities in a company, was 0.95 in 2007, decreasing gradually from 2004. It is generally recommended that this ratio is 1 or higher, however, 0.95 is a value close to that, giving a good reflection of the company's short-term financial viability. This is also important because any liquidity problems can then translate into bigger medium and long-term financial problems.
The financial leverage of the company, along with the debt to equity ratio, has, however, increased significantly from 2005 to 2007. In 2005, the financial leverage was 1.98 and the debt to equity ratio 0.40, while in 2007, the financial leverage was 2.91 and the debt to equity ratio 0.93. This shows that the company is starting to rely from on bank credits and…
Market Efficient espect Set Information Impossible Makes Abnormal Profits
In his work, Fama argued that given the massive use of resources by the brokerage firm to conduct studies on trends in the industry, the effects of changes in interest rates on corporate balance sheets and expectations of managers and/or political analysts of the companies should be able to systematically beat a generic portfolio with the same risk characteristics.
Since, according to Fama, professional in every situation, the analyst has a fifty percent chance of beating the market; although its specific capabilities did not exist he would beat a lot of the market. The analyst did "help" the market to be efficient if all the investors, in fact, would hold portfolios composed of stock indices, would open up significant opportunities for professional traders to take advantage of the situation. But the movement of traders to that "new market" would…
Arrow, K.J., 1959. 'Toward a theory of price adjustment', in M. Abramovitz (ed.), The Allocation of Economic Resources, and Stanford: Stanford University Press, pp. 41 -- 51.
Aumann, R.J., 1964. "Markets with a Continuum of Traders," Econometrica, Vol. 32, No. 1/2, Jan. - Apr., pp. 39 -- 50.
Clifton, J.A., 1977. "Competition and the evolution of the capitalist mode of production," Cambridge Journal of Economics, vol. 1, no. 2, pp. 137 -- 151.
Frank, R., 2008. Microeconomics and Behavior 7th ed. (McGraw-Hill) ISBN 978-007-126349-8.
Expenditures and Revenues Matrix
City or County: PAKISTAN
School nutrition fund
Major expenditure on wheat, rice, cooking oil etc.
Major expenditure on basic food items for schools of state
Major expenditure items like water supply to schools, checking and distribution of basic food items.
Major expenditure on formation and printing of textbook.
Major expenditure on acquiring textbook from federal government.
No expenditure on textbook.
Not making expenditure on school maintenance.
Not making expenditure on school maintenance.
Major expenditure on purchasing material for school and making payments to constructor.
School nutrition fund
Donations, tax payer money, other revenue generating activities like concerts, cricket matches etc.
Amount given by federal government, donations.
Amount given by state, donations
Revenue Item 2
Donations, tax payer money
Tax money raised by provincial government
No revenue sources…
American Management Association. (n.d.). Financial Decision Making and the Techniques Used in Financial Analysis. Retrieved April 16, 2012, from Flex Study: http://www.flexstudy.com/catalog/schpdf.cfm?coursenum=96088
Brigham, E., & Houstan, J. (2012). Fundamentals of Financial Management. Mason: Joe Sabatino.
Duncombe, W., & Joyce, P. (2012). Public Budgeting and Finance. Public Financial Publications.
Expenditure Guideline Matrix. (2010). Expenditure Guideline Matrix. Retrieved from purchasing: http://purchasing.ua.edu/information/spending_guidelines_nov_2010.pdf
Netflix is an entertainment company based in the United States that specializes on online on-demand streaming video, in addition to a DVD-by-mail service in America. The organization was founded in Scotts Valley in 1997 and two years later began its prevailing consumer subscription model. In the present day, Netflix’s consumer base comprises of more than 117 million subscribers in 190 nations across the world. Netflix are a forerunner in the internet delivery of television shows and movies, unveiling their streaming services in the 2007 financial years. From that point onwards, the company has developed an ecosystem for internet linked screens and have also brought in progressively more amounts of content that facilitate consumers to enjoy television shows and movies directly on their screens that are connected to the internet. Owing to these significant endeavors, Netflix has been able to experience increasing consumer acceptance of, and vesting in, the…
isk Management in Family Owned Businesses
A family business can be simply described as "any business in which a majority of the ownership or control lies within a family, and in which two or more family members are directly involved" (Bowman-Upton, 1991). In other words, it is a multifaceted, twofold structure consisting of the family and the business meaning that the involved members are both the part of a job system and of a family system (Bowman-Upton, 1991).
Most families seek stability, intimacy, a sense of community, and belonging through the family business (Hess, 2006). On the other hand, whenever family and business are mentioned together, a majority of people think of continuous conflict, competition and contention (Crenshaw, 2005). However, "successful family businesses do not let the family destroy the business or the business destroy the family" (Hess, 2006).
The family-owned businesses are the backbone of the world financial system.…
Barrese, J., & Scordis, N. (2003). Corporate Risk Management. Review of Business, 24 (3), Retrieved August 17, 2012 from http://www.questia.com/read/1G1-111508707/corporate-risk-management
Bodine, S.W., Anthony, P., & Walker, P.L. (2001). A Road Map to Risk Management: CPAs Can Help Companies Manage Risk to Create Value. (Consulting). Journal of Accountancy, 192 (6), Retrieved August 17, 2012 from http://www.questia.com/read/1G1-80750205/a-road-map-to-risk-management-cpas-can-help-companies
Bowman-Upton, N. (1991). Transferring Management in the Family-Owned Business. Retrieved August 14, 2012 from http://archive.sba.gov/idc/groups/public/documents/sba_homepage/serv_sbp_exit.pdf
Caspar, C., Dias, A.K., & Elstrodt, H. (2010, January).The Five Attributes of Enduring Family Businesses. Retrieved August 15, 2012 from http://www.businessfamily.ca/cert_register_files/Web Downloads/McKinsey Quarterly - Jan 2010.pdf
To remain relevant in today's highly competitive business environment, entities must be ready to take decisive steps aimed at enhancing their competitiveness. For instance, a firm may seek to replace its existing management with a more experienced or knowledgeable cast of leaders. In my opinion, I am convinced that a bigger budget would be in the best interests of the company I work for.
Why a Bigger Budget is in the Best Interests of the Firm
It is important to note from the onset that in my view, the future progress and competitiveness of the company I work for will be hinged on three main factors. These factors include new technology, continuous improvement as well as research and development initiatives. However, all these factors are in one way or the other capital intensive thus the need for a bigger budget allocation. To get a better understanding of the…
Hill, C. & Jones, G. (2008). Essentials of Strategic Management. Mason. Cengage Learning
Pride, W.M., Hughes, R.J. & Kapoor, J.R. (2011). Business. Mason: Cengage Learning.
34 billion = 1.02). The ratio for 2009 was calculated by: dividing $2.851 billion into $1.142 billion ($2.851 billion / $1.142 billion = 2.09). ("Marriot 2009 Annual Report," 2010) The lackstone Group has a debt ratio for: 2008 of 2.81 and 2009 of 1.50. The number for 2008 was calculated by dividing $9.489 billion into $3.37 billion ($9.489 billion / $3.37 billion = 2.81). The ratio for 2009 was determined by dividing $9.049 billion into $6.017 billion ($9.049 billion / $6.017 billion = 1.50. ("The lackstone Group 2009 Annual Report," 2010)
When you compare the debt ratio of Marriot with that of the lackstone Group, they both have a debt ratio above 1.0, indicating that they have more assets than debt. With Marriot this number increased between 2008 and 2009, highlighting that the company has been taking aggressive steps to reduce the underlying amounts of debt. Evidence of this can…
The Blackstone Group 2009 Annual Report. (2010). Black Stone Group. Retrieved from http://files.shareholder.com/downloads/BX/978607563x0x376134/C8C175CD-AE96-4BC1-BDE5-EDB7EF71268C/BX_AR09.pdf
Debt Ratio. (2010). Investopedia. Retrieved from http://www.investopedia.com /terms/d/debtratio.asp
Financial Ratios. (2010). Net MBA. Retrieved from http://www.netmba.com/finance/financial/ratios/
Marriot 2009 Annual Report. (2010). Marriot. Retrieved from http://files.shareholder.com/downloads/MAR/978589640x0x364053/B4988C82-12B9-4BAA-8CC8-50E085A764D5/Marriott_09AR.pdf
Price of bond= 0.385543*1000 +6.144567*100= $385.54.64+$614.45
Price of bond= $1,000
So, price of bond B. is $1,000 b. For market interest rate equal to 12%:
Price for bond a:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%
10% $1,000 Annual 20-20-12.00% annual 12.00% 20-12.00%
Now we need to calculate PVIF and PVIFA.
For calculation of PVIFA (i, n) and PVIF I is equal to 20 periods and n=12%
PVIFA= (1- 1/(1+.12)^20)/.12
Price of bond= 0.103667*1000+7.469444*100=$851
Price of bond a = $851
Price of bond B:
Market interest rate is equal Coupon rate is equal Face value Frequency Number of years to maturity Number of Periods Discount rate annually Discount rate per period n, periods r, per period 12%…
The June 2010 change to the manner in which dividends were deemed payable shifted the requirement from a measure of profit to a balance sheet-based formula in which dividends were only payable if assets outstripped liabilities, essentially.
This is, according to the facts of the case as presented, the only reason the dividend payment might be considered insolvent trading or otherwise contrary to the legal and financial constraints of the company under current Australian law. As the error was again solely the fault of chief financial officer George, the directors incur no liability in this instance.
As described above, the board of directors at Hampton Park Pty, td. incurred no liability in this case as they relied on information provided by a competent and informed employee in the person of the company's chief financial officer, George, which legally absolves them of liability in this case.
Whether or not…
Lipton, et al., 469.
Deloitte, "Changes to Corporations Law rules for payment of dividends." (2010).
Corporations Act 2001, Section 189.