Financial Management Of Vodafone Group Plc Assignment
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Added on 2020-01-28
Financial Management Of Vodafone Group Plc Assignment
Added on 2020-01-28
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FINANCIALMANAGEMENT
TABLE OF CONTENTSINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1Analysis of firm's operating, financing and investing activities.......................................1Industry comparative analysis...........................................................................................3Vodafone Group dividend policy......................................................................................5TASK 2......................................................................................................................................6Analysis of important qualitative factors to determine future financial performance......6CONCLUSION..........................................................................................................................8REFERENCES...........................................................................................................................9Appendix..................................................................................................................................11
INTRODUCTIONFinance is a vital component for smooth business functioning. Every enterprise needsadequate availability of funds to run its working operations effectively. Moreover, they arerequired to manage their finance resources in an appropriate manner. Financial managementis the process of managing business funds efficiently and helps to achieve organizationalobjectives to a great extent. It is a process that concerns with planning, procuring andcontrolling of financial resources of the organizations. Moreover, it consists of preparingfinancial plan and maintaining effective control over the financial activities of the business. Itmainly aims at maximising the business profits and shareholder’s wealth through minimizecost of capital. Vodafone Group Plc is the world's largest British telecommunication servicecompany that operates in 26 countries and headquartered in London, UK. It provides both thetelecommunication and Information Technology (IT) services to large number of customers.The present project report mainly aims at analysing the operating, financing and investingactivities of this business. Moreover, the qualitative factors will be analysed to evaluatecompany's future financial performance. TASK 1Analysis of firm's operating, financing and investing activitiesCash flow statement: It is a statement that measures the cash balance changes betweentwo accounting period. It measures the cash inflows and outflows through various businessfunctions (Harris and et.al, 2013). The statement summarizes the cash sources and itsapplication in business functions. It provides information about liquidity and solvencychanges. Public limited company prepares cash flow statement as per IAS – 7 at the end ofevery accounting period. In context to Vodafone Group Plc, the statement has been analysedby applying time series approach. It is an analytical approach to make data analysis for a timeperiod. It measures the cash changes between time periods. Cash flow from operating activities: Vodafone Group operating functions involvessales and purchase of its products and services. It involves all the daily functions of VodafoneGroup Plc. Cash inflows comprises generated business revenues and cash outflow comprisescash expenditures (Dumont and Schmit, 2013). Vodafone Group net operating cash flows inall the subsequent three years are positive which indicates that business generates higher cashincomes than the expenses. In the year 2015, company generated revenues amounted to8824£ which get decreased to 6227£ in the year 2014. It may be due to lower operationalincomes which creates negative impact to the profits. Moreover, fierce level of competition,1 | P a g e
growth in current assets and reducing current liabilities also results in reducing the operatingcash flows. However, in the year 2015, net cash flows got inclined to 9715£ respectively. Cash flow from investing activities: Investing activities measure changes in businessassets. It refers to purchases and selling activities of the company's assets. Sale of assetscontributes in cash inflow while acquisition of assets results in cash outflow (Brigham andEhrhardt, 2013). In the year 2013, net cash flows from investing activities indicate negativebalance of 5746£. It indicates that Vodafone Group acquired many fixed assets in theorganization and is comparatively higher than the disposal value of assets. In this year,Vodafone purchased interest in subsidiaries and joint ventures, investment and boughtintangible and tangible assets such as property, plant and equipment. On contrary, cash hasbeen generated through disposal of assets, investment, dividend and interest received. Thetotal cash inflows and outflows were 7657£ and 13403£ in this year. Thereafter, in the year 2014, the total cash inflows and outflows were 41970£ and11227£ respectively. High amount of cash inflows has been resulted due to disposal ofinterest in associates and joint ventures amounted to 34919£. Moreover, disposal of property,plant and equipment, investment, dividend received from joint ventures, investment dividendand interest incomes were 79£, 1483£, 4897£, 10£ and 582£ respectively. However, companypurchased tangible and intangible assets of 4396£ and 2327£ while interest in subsidiaries,associates, and investment has been purchased for 4279£, 11£ and 214£. Further, net cashflow got changed to positive balance of 30743£ which implies that Vodafone generated largercash inflows from its investing activities. It positively impacts the business as larger cashsources will be available to business for operating purpose.In the year 2015, net investing cash flow indicates adverse balance of 10327£. It isbecause; Vodafone's total cash outflows are comparatively low than cash inflows in this year.In the year, Vodafone paid high amount of cash for acquiring tangible and intangible assets.The purchase value of tangible assets was 6568£ and intangible assets has been acquired for2315£. Further, subsidiaries interest has been purchased for 3093£. On the other hand, lowassets have been disposed off in this year. The total cash inflows and outflows were 1941£and 12268£ resulted in adverse cash flows of 10327£ and impacts business operations innegative direction. Cash flow from financing activities: Vodafone needs sufficient finance sources to runbusiness operations in an effective manner. It includes inflow and outflow of business capital.Issuing share capital and additional borrowings will lead to increase the firm's cash inflowwhile redemption of share capital, debentures and repayment of borrowings will results in2 | P a g e
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