logo

Advance Corporate Finance - PDF

   

Added on  2021-05-31

14 Pages2248 Words126 Views
Running head: ADVANCE CORPORATE FINANCEAdvance corporate financeName of the studentName of the universityStudent IDAuthor note

1ADVANCE CORPORATE FINANCETable of ContentsAnswer 1....................................................................................................................................2Answer 2....................................................................................................................................3Answer 3....................................................................................................................................4Answer 4....................................................................................................................................6Answer 5....................................................................................................................................8Reference..................................................................................................................................11

2ADVANCE CORPORATE FINANCEAnswer 1Criteria for identifying mature firmMature firm is the company that is well established in the related industry and sellswell-known product to the loyal customers followed by average growth. Mature firms arealready passed through the rapid growth stage and are expected to grow at the same rate withthe economy. Further, these types of firms have various well established competitors.GWA Group Limited has been chosen as a mature firm on the basis of the followingcriteria –Revenue growth – it can be stated that there are wide level of divergence among therevenue growth rate and earning of various companies. While earning growth for themature firms can be high owing to the improvement in efficiencies, the revenuegrowth rate may not be altered. The revenue of GWA Group Limited for the last 43years is AUD 426,218, AUD 439,666 and AUD 446,332 respectively for the year2015, 2016 and 2017. Therefore, it can be identified that the company’s revenue isincreasing trend over the last 3 years and the growth rate is stable (Gwagroup.com.au2018). Established margin – another feature of mature companies is that they experiencestable margins with the only exception that the margin can vary with the function ofthe overall economy. It can be observed that the net profit margin of the company thatis calculated through dividing the net profit by the sales revenue for last 2 years are12.21% for the year 2016 and 12.02% for the year 2017 (Gwagroup.com.au 2018).Therefore, the company has established margin for the last 2 years (Coad andGuenther 2013).

3ADVANCE CORPORATE FINANCEDebt capacity – as the firms get matured, the earnings as well as the revenues improveand the reinvestment are required to be dropped off as more amount of cash isavailable for paying off the debt (Freitas, Marques and Silva 2013).. Therefore, thecompany always has a scope to raise more amounts through debt financing. It can beidentified from the last three year’s annual report of the company that the debt equityratio of the company that is calculated through dividing the debt by shareholdersequity is 0.41, 0.39 and 0.35 respectively for the years 2015, 2016 and 2017(Gwagroup.com.au 2018). Therefore, the debt of the company is lower than the equityand thus the company always had a scope to raise more fund through borrowing.As per the above analysis GWA Group Limited is fulfilling all the above mentionedcriteria are fulfilled by the company. Therefore, the company is identified as the maturecompany.Answer 2Dividend payout ratio and dividend yieldRatioFormula 20132014201520162017Dividend yield Annual dividend / stock price5.002.092.637.665.24Dividend payout ratio Dividend / Net income 113.290.3-81.481.1Dividend yield – this is the financial ratio that signifies the amount distributed by thecompany as dividend each year as compared to its share price. The dividend yield is stated asthe percentage and it is calculated through dividing the dividend’s dollar value paid inspecific year by the stock price of the share for the time (McMillan and Wohar 2013). This isalso states the company’s stability and generally supports the share price of the company.Generally, the dividend is distributed by the profitable companies and therefore, the investors

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Report On Debenhams's Corporate Financial Strategy
|24
|6240
|32

Financial Planning Methods
|4
|764
|18

Assignment Fundamentals of Corporate Finance
|15
|3990
|72

FINA 6000 Managing Finance
|7
|891
|39

Accounts Assignment- Computershare limited
|14
|2391
|43

Financial and Non-Financial Analysis of JB Hi Fi
|4
|1137
|375