Changing Dynamics of Corporate Financial Risks

Running head: STRATEGY AND FINANCE
Strategy and Finance
Name of the Student
Name of the University
Author Note

1
STRATEGY AND FINANCE
Table of Contents
Answer to Question 1...................................................................................................................2
Answer to Question 2...................................................................................................................2
Answer to Question 3...................................................................................................................4
Answer to Question 4...................................................................................................................4
Bibliography.................................................................................................................................5

2
STRATEGY AND FINANCE
Answer to Question 1
The analysis of the dividend policy of Marks and Spencer (M&S) suggests that the entity
paid a fixed dividend of £18.7p to the shareholders for the Financial Years 2015-16, 2016-17 and
2017-18. However, this changed to £13.9p for the F.Y. 2018-19. Hence, on the basis of the
above figures, it can be suggested that the business had a fixed-payout policy in terms of the
amount paid as a dividend. However, this has changed in the recent times and the company is
paying a reduced amount of dividends in the current financial year. On the basis of the Market
Based View, M&S is having a lower dividend payout policy which the company intends to
improve in the future period. This is because the company is operating in the retail industry on an
international scale and requires additional capital as a part of the expansion process. The
fluctuating ROE also suggests that the industry is susceptible to the decrease in returns over a
period of time. Hence, it is essential for the company to keep a low dividend policy to have a
higher level of reinvestment. The Resource Based View suggests that the company is also
reducing its high level of debt by repaying huge amounts of it. In 2017-18, the company has
reduced its debt amount by 15% to £523.2 million. Hence, the company has decreased its
dependence on the debt funds in the recent years and has reduced the dividend payouts made by
it. The payments of dividend are made by the company in the form of cash and deposited into the
bank account of the shareholders of the company.
Answer to Question 2
When analysed using the Life Cycle Model, it can be suggested that the Life Cycle of
Marks and Spencer is in the maturity phase. Hence, the company is operating in a profitable
manner and the dividends paid out by the company are medium to high in nature. A majority of
the amount declared by the company as dividend is paid out by the company in the short and