International Financial Management: Analysing Tesco's Dividend Policy, Efficient Market Hypothesis Theory, and Project Appraisal Methods

This report analyzes Tesco Plc's dividend distribution policy, efficient market hypothesis theory, and project appraisal methods in international financial management. It discusses the different types of dividend policies, Tesco's dividend reinvestment plan, and the efficient market hypothesis theory. It also explains the different methods of project appraisal, including economic analysis, financial analysis, market analysis, and investment appraisal techniques.

International Finance
Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Analysing and evaluating Tesco Plc dividend distribution policy ..............................................1
Efficient market hypothesis theory of Tesco Plc ........................................................................2
Tesco Plc methods of appraising projects ...................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................5

INTRODUCTION
In present world conditions, international finance management is a well-known
expression also known as international finance. It means the management of finance in an
international business environment which can be explained as trading and making money
through the exchange of foreign currency. These activities help organisations to connect with
overseas business partners, customers, suppliers, lenders and many more (Aizenman and
Jinjarak, 2020). Tesco Plc is a British multinational grocery and general merchandise retailer
headquartered in Welwyn Garden City, England. It was founded in 1919 by Jack Cohen. This
report includes a critically analysing and evaluation of the dividend distribution policy of Tesco
Plc and the efficient market hypothesis theory. Further, this report includes methods of
appraising projects.
MAIN BODY
Analysing and evaluating Tesco Plc dividend distribution policy
A dividend is a distribution of profits by a corporation to its shareholders and it is
determined by the company's board of directors. The dividend distribution policy of a company
tells the number of dividends and the frequency at which the company pays to its shareholders.
The company should follow different types of policies related to the dividend (Chiaramonte,
2018). The four most common type of policies regarding dividend is:
 Regular dividend policy – Under this arrangement, the organization follows the technique
of consistently delivering profits to investors. This is accepted when there is a steady
income and a stable income stable dividend policy – Under this, the company pays out a
fixed percentage of profits as a dividend yearly.
 Irregular dividend policy – The strategy contains the organization expressing no
commitment to providing profits to investors.
 No dividend policy – Under this strategy, the organization does not generate any profit
for investors, regardless of its benefits or misfortunes.
The annual profit per share divided by the quoted cost is called the profit margin. As for
Tesco, the group's earnings strategy and total dividend per share depend on offers held by
investors on the record date, but earnings returns are still up in the air. Profits can be paid out
with real money or used to buy more Tesco Plc shares. According to the London Stock
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Exchange's profit system, the current record date is one day after the ex-dividend date. In
accordance with Tesco plc policy, dividend payments made directly to shareholders' banks or
building society are quicker and more secure. Since the company pays two dividends a year
which is the interim and final dividend. In the year 2022, Tesco paid an annual dividend of £7.7
per share in the month of May and they paid an interim dividend of £3.2 per share in the month
of November 2021. After every payment of dividend, Tesco operates a dividend reinvestment
plan which allows reinvesting cash dividends in additional company shares. From April 2018,
the dividend allowance rate was reduced from £5,000 to £2,000 which means UK tax is not
required to be payable on the first £2,000 of dividend income from any ordinary shares. The
allowance is available to only UK taxpayer who has dividend income. This retail giant, they have
a policy about the special dividend. There was an ex-special dividend rate of £50.93 per share.
Efficient market hypothesis theory of Tesco Plc
The Efficient market hypothesis theory is a risky assumption that recommends that the
cost of a monetary instrument reflects all appropriate market data. As such, it says that when new
data hits the market, it is quickly reflected in the cost of stock so that neither professional nor
necessary checks generate excessive returns. It is closely related to the functional productivity of
an organization (Chiou and Shu, 2019). Subsequently, it's basically difficult to either buy the
undervalued stock at a greater cost or sell the overstated stock for additional gains. The most
efficient way for currency experts to get higher yields is to buy more dangerous resources. The
three varieties contain different levels of market efficiency and fall into the following categories:
 The weak form – This includes the market cost of all monetary instruments involving all
open data related to the market. It expects real information such as costs and returns to be
independent of future costs (Zhu, 2020).
 Semi-strong form – This work makes complex assumptions about the structure of
weightless and acknowledges that market costs are rapidly changing for any new open
data generated.
Strong form – This includes the market cost of securing verifiable and current data. It contains
internal data as well as publicly disclosed data.
Market research by Tesco Plc shows that functional proficiency and viability are closely
related to its inventory cost. Any rate change in functional effectiveness will result in a change in
its inventory cost. Market research shows an internal and external examination of different
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fundamental macroeconomic factors that may affect the business to a more noteworthy degree,
as well as a reliable type of efficient market speculation. It can help businesses manage the
unpredictability of collecting control and keep up with some of their costs to keep investors on
par with their abundance.
Tesco Plc’s methods of appraising projects
Project appraisal is the process of assessing the cost and benefits analysis of different
aspects of the proposed project with the objective to determine its viability and profitability
(Dubinin, 2021). There exists different project appraisal method which helps the company in the
determination of the feasibility of projects in order to increase its earning capabilities. It helps in
arriving at particular and predicted results and it also determines the desirability of the projects.
Project appraisal provides information to ascertain the success or failure of a project. Some of the
methods of project appraisal are as follows:
1. Economic analysis – In this, the project aspects highlighted include requirements for any
business group considering different economic situations regarding availability of
resources, anticipated sales, anticipated expenses, probable earnings and many more.
Every business needs to form a governing authority that analyses all the significant
economic factors before investing in any project. Tesco Plc must be taken into account
for consideration like government policies and procedures regarding the banking and
finance industry.
2. Financial analysis – Under this, it includes both fixed capital and working capital
requirement (Sinervo and Haapala, 2019). This is the first analysis that should be
performed by a company in order to check the financial feasibility of the projects Tesco
Plc must recognise and critically examine the crucial factors regarding the requirement of
fixed capital and the availability of working capital. Fixed capital is required for long-
term capital assets while working capital is required for routine day-to-day activities.
3. Market analysis – Before starting the production of a product, the company must conduct
a market analysis to understand the potential demand for a product. It involves demand
forecasting which helps in anticipating and identifying the particular market segment for
the purchase of a product. Some of the common methods of market analysis include:
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 Opinion polling method – In this, a survey is conducted and the opinion of ultimate
consumer is considered. This includes various methods are sample survey, sales
experience, vicarious method.
 Life cycle segmentation analysis – It is based on the concept, that like humans a
product also has a defined life cycle. The product life cycle captures the includes
introduction, growth, maturity, saturation and decline.
Market analysis of Tesco Plc is required to assess the different marketplace in which it will
conduct its operations. It will help businesses in increasing its scale of operations and size of
business. It will benefit the business in preparing relevant market strategies to run their
operations in long run.
 Investment appraisal techniques - These are also known as capital planning
techniques (Meissner, 2018). It helps organizations determine whether a task will
provide normal returns over the long term. Some of the risk assessment methods
are –
 Payback period: It is the length of time required to recover the initial outlay on the
project. This period is usually expressed in years. It recognises the need for the
recovery of the original capital invested in the project.
 The average rate of return method: It is seen as an improvement over the pay
period strategy because it takes into account the revenue of the task over its entire
effective lifetime. It is the risk-reward-related productivity ratio that utilizes
typical bookkeeping procedures to quantify the spread of speculative expected
returns.
 Net present value: This is the amount of mission-related limited future funding
inflows and surges (Tsindeliani and et.al., 2019). It has significant implications
for the time value of cash and the level of the organization will expand the
richness of investors.
In terms of risk strategy, Tesco Plc's execution has a variety of ways to focus on the expense of
long-term capital options, namely the purchase of equipment to create. This is important because
it affects the company's withdrawal income. Instantaneous speculation is related to currency
levels, inventories, etc. These choices affect the day-to-day work of an organization.
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CONCLUSION
From the above report, it can be concluded that international finance management help
Tesco in many ways company receive competitive interest rates and terms, safety from political
instability and potential tax savings. The dividend distribution policy of Tesco Plc is a regular
one which means that the company consistently pays a dividend in the form of the interim and
final period. Further, this report includes about efficient market hypothesis theory on Tesco Plc
which is a strong form that reflects all the relevant and substantial information which could
affect its value. In last, there are some of the project appraisal methodologies explained and
examined which help any business in making any investment.
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REFERENCES
Aizenman, J. and Jinjarak, Y., 2020. Hoarding for stormy days—Test of international reserves
adjustment providing financial buffer stock services. Review of International
Economics. 28(3). pp.656-675.
Chiaramonte, L., 2018. Bank liquidity and the global financial crisis. Palgrave Macmillan
Studies in Banking and Financial Institutions.
Chiou, C.L. and Shu, P.G., 2019. How does foreign pressure affect a firm's corporate social
performance? Evidence from listed firms in Taiwan. Journal of Multinational Financial
Management. 51. pp.1-22.
Dubinin, S.K., 2021. The modern financial conglomerates competition. Mirovaia ekonomika i
mezhdunarodnye otnosheniia. 65(8). pp.14-21.
Meissner, M.H., 2018. Accountability of senior compliance management for compliance failures
in a credit institution. Journal of Financial Crime.
Sinervo, L.M. and Haapala, P., 2019. Presence of financial information in local politicians’
speech. Journal of Public Budgeting, Accounting & Financial Management.
Tsindeliani, I.A. and et.al., 2019. Financial law as a public law branch: a fresh look at the signs
of publicity. Journal of Legal, Ethical and Regulatory Issues. 22(5). pp.1-12.
Zhu, A.Y.F., 2020. Impact of financial education on adolescent financial capability: Evidence
from a pilot randomized experiment. Child Indicators Research. 13(4). pp.1371-1386.
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