International Financial Management Report and Analysis for Tesco PLC

This report provides a comprehensive analysis of Tesco PLC's international financial management (IFM). It begins by highlighting the importance of IFM for the company, emphasizing its role in managing monetary transactions, maintaining a global presence, and evaluating currency rates. The report then examines the barriers Tesco faces, including price decreases, Brexit, and the COVID-19 pandemic. A detailed discussion of Tesco's dividend policy follows, including dividend distribution methods and the dividend discounted policy. The report further explores the application of the efficient market hypothesis (EMH) to Tesco, assessing the degree level of EMH and its implications for stock prices. Finally, the report appraises projects related to Tesco PLC, focusing on economic appraisal, financial analysis, and market analysis to determine the financial health and performance of the company. The report concludes that IFM is vital for Tesco's financial goals and growth in the international market.

International Financial
Management

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
1.Importance of International financial Management for Tesco PLC........................................2
2.Barriers Faced by Tesco PLC at Global Level .......................................................................3
3. Dividend Policy Distribution of Tesco PLC...........................................................................3
4. Efficient market hypothesis theory of Tesco PLC..................................................................4
5. Appraising project related to Tesco PLC................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES ...............................................................................................................................7
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INTRODUCTION
This report contains some important information about the international financial
management. It is refers to the analysis, evaluation, and management of the monetary
transactions between the two organisation at the international level (Bhattacharya, and et.al.,
2020). The international financial management is different from domestic financial management.
It is because in the IFM there are different currencies which have different values, different
politics environment and the deals between the organisations are very large in size. The
international financial management was comes in existence when the organisations of the
country starts trading with other country's organisation. This report contain international
financial management of the Tesco PLC. It is an multinational company which is dealing grocery
and merchandising retailer. This company started their business in the 1919. All other
informations related to this company are mentioned in the below report.
MAIN BODY
1.Importance of International financial Management for Tesco PLC
As it is discussed above in the report that International financial management helps the
organisation to evaluate or analyse the monetary transaction of the company. It is not only helps
in analysing the monetary transaction but also helps in planning,organising,directing,and
controlling the monetary resources of the company (Chen, and et.al., 2018). Some importance of
the IFM in the Tesco PLC are given below-
 IFM help the Tesco in dealing with other companies in the international market. If
there is any kind of issue raise between the two companies related to the money
then by the help of IFM the issue can be solved.
 IFM manage the monetary resources of the company in the international market
which helps the Tesco in maintaining the image and goodwill at the global level.
 By the help of the IFM the Tesco can evaluate the currency rate at global market
and make their deals with other companies according to it.
 IFM also helps the company in the in the expansion of their production capacity.
2.Barriers Faced by Tesco PLC at Global Level
Decrease in price- Tesco was successfully running their operations in the international
market but in 2008 their sales was decreasing rapidly due to inability to adapt the market trends
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(Dimitras, Gaganis and Pasiouras, 2018). So to boost-up the sales of the organisation Tesco
adapt price cutting policy and do more and more promotion which leads to increase in cost of the
organisation they start suffering from losses.
Brexit- The another challenge faced by the Tesco was Brexit because after the passing of
referendum many European organisation starts grabbing the market share of the Britain's
organisation. Sue to this the customers of the company at the global level are decreasing
continuously.
Covid pandemic- The another barrier faced by the Tesco PLC is the global pandemic
known as Covid19. This pandemic affects the operations of every business and due to the
lockdown conditions the company not able to produce the enough goods in the market. The
company is able to supply their products to other countries due to the restrictions as a result the
company starts suffering for the funds and also bear the losses in the profitability of the
organisation.
3. Dividend Policy Distribution of Tesco PLC
Before understanding the dividend policy first take a look on the definition of dividend. It
refers to the amount which is paid by the company to their shareholders according to amounts of
share they hold in the market. Companies pay their dividend from the profits which they earn
during the financial year. It is not necessary for the company to pay the dividend to the
shareholder. The company can retain that amount for the operations or uncertainties which they
can face in future. This amount is considered as retained earning. Companies can use various
dividend policy for attract the shareholder.
Tesco pay their dividend according to the size of the shares hold by their share holders.
Tesco company can pay their dividend by the help of two methods. They can pay their dividend
by cash or by allotting more Tesco PLC shares (Mokni and et.al., 2020). Tesco also use Dividend
discounted policy which is used for estimating the rate of the company's stocks in the market. It
can only be done by the help of the theory which show that the present price is value overall of
its upcoming payment of dividend. Here is a formula to calculate the dividend discounted
policy.
P = D1 / r – g
where, P = Stock price
D1 = amount of upcoming year dividend
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r = fixed cost of equity capital
g= fixed growth rate forever.
The above diagram shows the payment of dividend made by the Tesco to their shareholder in the
last three years. It is understandable from the above statical diagram is that in 2020 due to the
impact of Covid the company was no able to pay the dividend to their shareholder (Nazal and
Al-Fasfus, 2018). Even in that condition they manage to pay some amount of dividend to their
shareholder. In the next year 2021 company able to regain their position on track so due this they
pay the sufficient dividend to their shareholder. 2022 is still going on and in the first quarter
company pay their dividend.
4. Efficient market hypothesis theory of Tesco PLC
It is generally known as EMH. This financial concept is used by the most of the companies. This
theory was introduced by the famous economist named as Eugene Fama in the year 1960. The
efficient market theory is a concept which explains that the values of the assets wholly shows all
the available information (Saptono, 2018). This theory explains that technical and fundamental
analysis practices are not measured prescinding trends and undervalued stocks in the business
market. Efficient market hypothesis have different degree levels which are known as strong,
weak and semi strong which shows the level of information available through the price of the
assets. If the efficient hypothesis market of the any company is weak then it is automatically
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considered that the value of assets of the companies shows all the information in the market. If
the theory is strong then it is considered that the prices of assets doest not show any information
about the company (Oseifuah and Gyekye, 2018). Now last degree, it means that if the theory is
semi-strong then the price of assets shows or reflect half information about the companies.
The stock price of the Tesco PLC in the January 2020 was approx 250 pounds per
share and the price in January 2021 was approx 295 pounds per share. This means that price of
the stocks of Tesco PLC are increased but not with a very good rate. There are ups and downs
during the year. According EMH theory the degree level of the Tesco company is semi strong
because the price of the share shows almost all information. Due to this both sectors private and
public can earn excess return from it.
5. Appraising project related to Tesco PLC
Economic Appraisal- It is considered as a challenging determinant which contain the all
necessary items like raw material, utilisation of resources, predicted charges and the likely
profits. The Tesco PLC is third largest grocery retailer in the world which means that they
require large amount of money for their operations. To improve the capacity of production the
Tesco PLC have to increase the financial resources and utilise that resources in the efficient way
so that they can easily achieve their target in the international market.
Financial Analysis- The next factor of appraising project is financial analysis in which
the the Tesco company have to analyse and evaluate the financials of the organisation. Buy the
help of this activity the Tesco company can save themselves from the uncertainties which they
can face in future. The analysis of financial of the company not only beneficial in the future
uncertainties but also helps in determining the places or segment where they are mostly utilise.
Due to this the organisation can control that finances from anu wastages.
Market Analysis- The and last important determinant of appraising project is is market
analysis. By the help of market analysis the Tesco PLC can easily estimate the trend and demand
in the market (Ryu, Kim and Ryu, 2019). This activity helps them to increases the opportunity
of earning profit by the expansion of the business in the new industry.
CONCLUSION
From the above it report it is concluded that the International financial management helps the
organisation to achieve their financial goals at the international level. The IFM is very important
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for the organisation because by the help of this they can deal with the companies of other
countries. After that the above report also include some barriers which the Tesco PLC have face
in the past years of their journey. According to the Tesco's efficient market hypothesis theory it
can be understandable that the Tesco PLC is come under semi strong level of degree which states
that the information of the organisation is reflected by the price of their share.
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REFERENCES
Books and Journals
Bhattacharya, M. and et.al., 2020. Credit risk and financial integration: An application of
network analysis. International Review of Financial Analysis. 72, p.101588.
Chen, T.F. and et.al., 2018. The profitability effect: Insights from international equity
markets. European financial management, 24(4), pp.545-580.
Dimitras, A.I., Gaganis, C. and Pasiouras, F., 2018. Financial reporting standards' change and
the efficiency measures of EU banks. International Review of Financial Analysis. 59,
pp.223-233.
Mokni, K. and et.al., 2020. Economic policy uncertainty and the Bitcoin-US stock
nexus. Journal of Multinational Financial Management. 57, p.100656.
Nazal, A.I. and Al-Fasfus, F.S., 2018. Weakness of financial performance in Jordan Islamic
Bank. Academy of Strategic Management Journal. 17(3), pp.1-15.
Oseifuah, E.K. and Gyekye, A.B., 2018. Effect of Global Financial Crisis on Firm Value:
Evidence from JSE Listed Non-Financial Firms. The Journal of Accounting and
Management. 8(1).
Ryu, D., Kim, M.H. and Ryu, D., 2019. The effect of international strategic alliances on firm
performance before and after the global financial crisis. Emerging Markets Finance and
Trade. 55(15), pp.3539-3552.
Saptono, A., 2018. Entrepreneurship education and its influence on financial literacy and
entrepreneurship skills in college. Journal of Entrepreneurship Education. 21(4), pp.1-
11.
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