Financial Management

4387 Words Dec 24th, 2008 18 Pages
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CONTENTS

1. Introduction
2. Financial management policies and structures 1. Capital investment decisions 1. Financial decisions 2. Dividend decisions 3. Investment decisions
3. Working capital management
4. Risk management
5. Strategic decisions
6. Social, ethical and environmental decisions
7. Evaluation of usefulness of Hermes principle
Appendices
1) Retail gearing 2) Share 3) Dividend paid 4) Business model 5) Profitability 6) Working capital cycle 7) Revenue 8) Bibliography

FROM: Itayi Mutete
TO: Neil
SUBJECT: An Investigation of Marks and Spencer and the Hermes principles
DATE:
…show more content…
In the past five the company’s retail gearing levels were high (over 50%) with exception of 2003 when it was 44.7%. (See appendix 1)

Sources of internal finance The company’s main sources of internal finance used to finance the group’s operations include retained profits, cash and liquid resources, trade debtors and trade creditors.

Sources of external finance Debt financing In years where there is a financial deficit M&S uses the following additional funding to help finance the deficit and support growth of the company: ➢ Medium Term Note (MTN) Programme is used to finance Marks and Spencer’s medium term financing needs. This type of funding is cheaper and easier to access and can be used to achieve better asset-liability management. M&S renewed the MTN programme in September 2003 and the Euro Medium Term Note programme in 2005. A 10-year public bond worth £400m was issued in March 2004 under the existing programme at a fixed rate of 5.625%. The funds raised were used as a cash contribution into the UK defined benefit pension scheme.

➢ Commercial Paper Programme is used by the company to meet short-term requirements and to manage working capital. The main advantage of using this type of funding is that it is not backed up by specific assets in other words it is unsecured. It is also cheaper than using bank loan.

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