Financial Management: Dividend Policy and Merger and Acquisition

Financial Management

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Question 1 – Dividend Policy..........................................................................................................1
1. Size of annual dividend which return to their shareholders....................................................1
2. Practical issues need to be consider at the time of deciding size of dividend.........................3
3. Calculate the effect of three options........................................................................................3
4. Critically evaluate that how company’s decisions affect the investment opportunity of £70
million in a project.......................................................................................................................5
Question 2 – Merger and Acquisition..............................................................................................6
1. Price earnings ratio..................................................................................................................6
2. Dividend valuation model........................................................................................................7
3. Discounted cash flow method..................................................................................................8
4. Discuss the problems which associated with valuation model................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial management involves planning, coordination, direction and regulation of monetary
operations such as acquisition and use of company funds. It implies application of principles of
general management to company’s financial capital. It concentrates on percentages, equity, and
debt (Anthony, 2019). This is beneficial for management of portfolio, distribution of dividends,
capital accumulation, hedging and managing foreign exchange and product life cycle changes.
Financial managers are individuals who conduct research and determine which kind of capital to
raise to finance company's assets along with enhancing the company's value to all shareholders
based on their research. This also applies to an efficient and effective management of funds in a
way that achieves organization's objectives that is to maximize its profit and improve its financial
position to gain competitive advantage over its competitors. For the better understanding of two
companies Squeezo and Aztec are taken which states the impact of various dividend policies
along with merger and acquisition concepts. This report contains calculation of divided with
three different strategies from which best is taken in to consideration, where for detail
understanding of merger and acquisition take of Trojan is taken which states various issues faced
by Aztec.
MAIN BODY
Question 1 – Dividend Policy
1. Size of annual dividend which return to their shareholders
Dividend is just the portion of income of the business under the determination and selection
of the board of directors; it is reported and paid as a ratio of par securities or per share. In
addition, dividend is a percentage of the surplus that exists after making adequate provision for
various forms of resources and taxes etc. after subtracting all expenditures in overall revenue
(Greve and Man Zhang, 2017). The firm's representatives have the obligation to this profit even
if they can not agree on its prompt sale. If the company wants money so the corporation will
keep the full share of the profit without distributing dividend.
Dividend is also not declared in case the entire income is permitted to be in the context of
different funds or surplus. When settling on a dividend statement, the owners should implement
the normal two things into account which mentioned below:
Fair consideration to the shareholders:
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The managers should provide a reasonable estimation of the degree to which owners plan to
get a gain in return for money and taking risks. If it is not done, keeping the investors completely
happy can be challenging and this can often negatively affect the business performance of the
company's shares goodwill (Buchanan, Cao, Liljeblom and Weihrich, 2017).
Company requirements:
Managing the overall financial status is the first responsibility of managers, even as leaders
are asked to make certain sacrifices for doing so. This is also extremely important for the
investor to be able to accurately determine how much extra funding the company needs in order
to grow and expand.
Factors are evaluating at the time of making dividend decisions:
 Life of company: New firms also aren't able to pay the shareholders fair returns for a few
years. They will need adequate money for growth in the early years, which they're not in
a place to quickly acquire from the marketplace (Ehrhardt and Brigham, 2016).
Therefore, they would return with their own internal financial resources. In comparison,
older firms may need comparatively less money, but even if they do, they are receiving it
from the economy. A Moderate dividends policy can be implemented in such a scenario.
 Nature of Business: It is only Squeezeco, which distributing revenue in regular who will
pay monthly dividends. Industries in this grouping include businesses manufacturing
daily-use specifications. Only businesses participating in public service will pay
dividends to the shareholders on a regular basis. Companies concerned with the
manufacture of expensive goods cannot continue to pay daily dividends.
 Financial position: Even though the Squeezeco is able to earn adequate income to pay
dividends due to its earnings condition but they cannot pay dividends in cash. Given
income and excess the company's liquid situation can worsen. The organization will pay
dividends in the form of incentive shares in this situation.
 Capital requirement in the future: The dividend strategy also impacts on the
Squeezeco 's future ambitions. If a specific growth plan occurs before the business,
otherwise such a corporation must adopt a stringent dividend strategy, so that extra
resources can be properly managed by restricted access. Under such a case the re-
appropriation of profits would be given greater priority.
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