Avon's Dividend Policy

Financial management in U.S. firms covers many areas in stocks and cost optimization of the company’s performance management, especially in IT. Many emerging and recent

According to Titman et al. 2012, “Financial management is the study of how people and businesses evaluate investments and raise funds to finance them” (Titan, 2012, p. 3). Lately, it has become very important to investors and creditors to pay attention to the data and statistics that are being released by companies and their financial status. The information that is released in these statements allows investors and creditors to know the safety and profitability of their investments.

Blaine’s financial posture was very conservative as they have only twice borrowed beyond seasonal working capital needs. Although the company has very conservative roots it is important that they realize the need to acquire leverage and buy back stock. The shares outstanding have amplified, which has consecutively increased their payout ratio to an outstanding more than fifty percent of their net income being spent on dividends. It is very important that Blaine’s overturns the dilution of the shareholders percentage of ownership and put a stop to the trend in their payout ratio as it is unsustainable. The primary advantage to the repurchase of stock is that stock holders that remain will have a higher owner percentage (presumably the family member won’t sell their stock) and therefore the payout ratio can descend and earnings per share can ascend.

Swenson chooses to pay out dividends, she must also decide on the magnitude of the payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising and change its corporate name to reflect its new outlook. The case serves a review of the many practical aspects of the dividend and share buyback decisions, including(1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout and share

Another option Linear Technology has to exercise its excess cash balance, they can repurchase shares to increase the value of the firm. This repurchase option is beneficial to the company and shareholders because in an open market share repurchase has no effect on the stock price. In addition, by repurchasing shares the firm’s earnings and earnings per share will increase. As shown in Exhibit B, by calculating the total numbers of shares repurchased (total cash balance/price per share) and subtracting it from the number of shares outstanding will give us the number of shares left outstanding after the repurchase to be 261,703,052. Exhibit B shows how this decrease in the number of shares drove up the earnings per share value by $0.10 from $0.55 to $0.65. When the company repurchases shares instead of paying out in special dividends, the firm’s value will increase and it also allows the firm to retain its cash reserves within the company.

On the 21st of October 2014 the share price of Asos went up despite profits having fallen in the past year. The reason for this fall in profit was due to the tough year the company had in the financial year 2013 to 2014. The company lost potential sales and had to pay the cost of a fire damage at its global distribution centre in Barnsley in June 2014. Additionally the company faced adverse foreign exchange rate movement in its international markets due to the pound getting stronger. This ended up to be one of the main reason in affecting the international sales which count for 60% of the group revenues. On the other hand the company made some major investments in technology and international markets so as to expand and find a competitive edge and this hasn’t paid of well yet. To make these investments over the past year the company decided at the end of the financial year 2012-2013 that it will stop paying dividends as it needed the money for these investments and it will be for the better of the company as a whole. However at the end of the financial year 2013-14 the earnings per share went down by 11% due to the fall in profits. (Flecther, 2014)

This report is submitted as partial fulfilment of the requirements for Module MBA 407 Financial Management at the European Business School London in spring 2010. We declare that this document embodies the results of the group’s work and that it has been composed by the group. Following normal academic conventions, we have made due acknowledgement of the work of others.

Brigham, E.F. and Ehrhardt, M.C. (2010) Financial Management: Theory & Practice, International Student Edition   South-Western Publication.

When it comes to corporate finance, there are many principles that are important. These include the principles of

Watts (1973) examined 310 firms for a period from 1946 to 1967 to find the evidence of a hypothesis that a firm’s future can be predicted using dividend changes. The tests took place in year t+1 for the future earnings and t, t-1 for the dividend levels. From the examinations, he concluded that generally the information content of dividend announcement could only be trivial (Watts, 1973).

The market for corporate control generated $180 billion during 1985-1986 and raised $346 billion for shareholders through mergers and acquisitions in 1977-1987 (Jensen, 1988). Cadbury was viewed as a firm that integrated corporate social responsibility and Quaker values in its everyday decision-making and management (Hemingway and Maclagan, 2004). Todd Stitzer and Roger Carr both previously managed Cadbury and believe that after Kraft’s takeover in 2010 the altruistic spirit that has been embedded in the culture of the firm will be lost (Wiggins, 2010). Rowlinson (1995) argues that Cadbury was maximising the shareholder’s value instead of satisfying other stakeholder’s needs all along. Shareholder value can be defined as only carrying out investments that bring the most benefits to the shareholders. These events make it important to explore when Cadbury really lost is altruistic spirit and how it was affected by the shareholder value. In this essay I will examine whether Cadbury’s altruistic spirit was lost after or before Kraft purchased it. I will argue and further develop Lazonick (2000) and Rowlinson’s (1995) points about Cadbury losing its altruistic spirit before the takeover by Kraft through the introduction of a shareholder value strategy and expansion through external growth. I will present my argument in three main parts. Firstly I will explore how mergers and acquisitions helped Cadbury grow, the reasons behind them and how it affected the culture of the firm.

A dividend is the part of a firm`s earnings that are paid to the shareholder, either in monetary terms or as shares. In the UK, dividends are paid by UK-quoted companies semi-annually and are taxed depending on an individual`s income (Arnold, 2008 & GOV.UK, 2015). According to the Financial Times (2015) however, a dividend payment to shareholders is not an obligation, in fact a business`s board of directors are able to opt whether they desire to make a dividend payment or not, depending mostly on the health of the business. If so, the dividend payment to shareholders is made from a firm`s accumulated profits or reserves pots, with the anticipation that the firm can cover this withdrawal of monetary funds by injecting further cash quickly and efficiently into the firm or shareholders may receive dividends in forms of shares, in this situation, a firm is unlikely to lose much as shareholders would be likely to reinvest into the firm. Conversely, if a firm`s board of directors opt the opposing decision, not to make a dividend payment, this is likely to be due to a firm supporting an insufficient cash-flow or the monetary fund’s being identified as needed urgently for more meaningful purposes, such as reducing debt (The Financial Times, 2015). Despite this, the main question in consideration is: whether a rational investor considers dividends when determining the value of shares? In order to answer this question effectively, this essay shall commence further through exploring

Bonus issues are simply distribution of additional stocks to the existing shareholders. It is a “free” issue of shares, without a subscription price, made to existing shareholders in proportion to their current investment. A firm can distribute bonus shares by using retained earnings or accumulated capital reserves. The relationship between Bonus issues and share prices has been the subject of much empirical discussion within the finance

The purpose of this paper is to present a report on the financial management principles practiced by the example firm, Mahle Group. Financial managers are guided by four basic principles that provide a framework for successful business. This research utilizes three of the research methods of financial analysis to analyze how these principles were applied by Mahle Group to discover if the firm has followed the financial principles or has strayed away from them. Mahle Group’s yearly financial statements were reviewed and then analyzed using financial ratios to determine the status of the business between 2013 and 2014. The analysis revealed that Mahle Group has properly applied the three basic financial principles by decreasing their debt, in inventory, costs of opportunity and has excelled in the money has a time value principle, the risk-return tradeoff principle and the cash flows are the source of value principle.

Ejercicio ST-2 capítulo 7, Brigham, E.. (1992) Fundamentals of Financial Mangement,Estados Unidos: Editorial The Dryden Press,6a ed