IFM Report: Dividend Policy, Market Hypothesis & SAINSBURY Analysis

This report provides an analysis of international financial management (IFM) concepts in the context of SAINSBURY, a major UK retailer. It examines SAINSBURY's dividend distribution policy, exploring regular, stable, irregular, and no-dividend approaches and their implications for investors and company growth. The report further analyzes the efficient market hypothesis (EMH), considering weak, semi-strong, and strong forms, and how they relate to SAINSBURY's stock performance and market information. Finally, it outlines methods of project appraisal used by SAINSBURY, including net present value (NPV), payback period, and internal rate of return (IRR), highlighting their role in evaluating project profitability and managing cash flow. The report concludes that effective IFM strategies are crucial for SAINSBURY's international financial operations.

International
Financial
Management

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Give an analysis of the Dividend Distribution Policy.................................................................3
Analysis of efficient market hypothesis theory in context of SAIN'SBURY..............................5
Methods of Projects Appraising in SAIN'SBURY......................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
International Financial Management indicates the finance management in the
international business environment. It is also called as the International Finance, it comes when
the different countries start opening their doors for each other. International Finance plays a very
essential for many companies who have no idea how to engaged in international business.
Companies learn how their dealing effects the exchange rate, inflation and the trading of money
through exchange of foreign currency. Operations and activities of international finance supports
the overall whole organisation to trade and connect with the international business partners like
suppliers, investors, and lenders. Efficient management of international finance helps the
organisation to achieve their goals in effective manner (McKinney, J.B., 2020). In this case we
studied about the SAINSBURY business SAIN'SBURY business which is the second largest
retailer with 1400 stores in UK. It is headquartering in London. It deals in wide range of products
in the whole market such as food, clothing, electronic, grooming items, financial sectors, banks.
In this report we analyse about the dividend distribution policy of SAIN'SBURY and what are
the effective market hypothesis and appraising method company uses.
MAIN BODY
Give an analysis of the Dividend Distribution Policy.
Dividend Distribution policy states that this policy majorly used by the companies to
distribute certain amount of equity to the investors and shareholder in the dividend form by the
organisation have to maintain balance between the pay out and retained earnings to fulfil the
needs of the organisation.
In relation to SAINSBURY case dividend amount per share were decided by the Director
of board. SAIN'SBURY usually pays previous financial year dividend in July and in each
December pays interim dividend (Laeven, 2020).
Below are the SAIN'SBURY dividend policy:
 Regular Dividend Distribution Policy: This policy states that when the payment of
shareholder dividend pays on every year, this procedure is followed by the companies in
which they have to pay dividend on a regular basis in every year. In case of abnormal
profit earn by company then company have to pay extra profit to its shareholders. But in

case if any company facing some loss in any year it doesn't matter company have pay
dividend to their shareholders. In case of SAIN'SBURY, Sainsbury business is well
established and efficient stable earnings and cash flow that attract the investors to invest
in their company because in eyes of investors company who pays regular dividend are
high effective than quarterly paying of regular dividend (Walker, 2019).
 Stable Dividend Distribution Policy: It states that in yearly basis company pays a fixed
percentage of profit in the form of dividend. This policy demotivates or discourages the
investors to invest because in this policy amount of the dividend fluctuates with the level
of profit in the company that's why investors feels risk in investing in that company. In
case of SAIN'SBURY, by paying the fixed percentage of profit every year attracts the
more investors in company, if company pay out dividend in three components like first as
a constant dividend per share, for the payment of constant dividend per share company
prepared the reserve funds. Another is constant payout ratio, in this dividend payout
company are not volatility verifiable to pay the dividend. Lastly, is the target payout
ratio, also known as stable dividend policy, in this policy company maintain a stability in
paying the dividend evert year which helps the market in stable market share value.
 Irregular Dividend Distribution Policy: It refers that in this company's board of
director will decides at what rate dividend paid, company is under no pressure to pay
dividend to their shareholders. The board of director’s decision of paying dividend were
not depending or related with the company's condition, and scenario whether they earn
profit or loss only the board of director's decision considering for paying dividend. If
there is no profit or low profit than the decision taken by directors to pay or not. In Case
of SAIN'SBURY by using this policy company is under no pressure for paying the
dividend to its shareholder, the board of directors will only decide about the distribution
of dividend. If any profit arises in a certain year the board of directors have to decides
whether to pay to shareholder or pay not any dividend to the shareholders and utilise that
profit in the expansion and growth of the business (Dimitriou and Kenourgios, 2019).
 No Dividend Distribution Policy: No dividend policy refers that when the company not
pay dividend to their shareholders whether they earn profit and loss not matters, because
company reinvest and retained earned profit for the expansion and growth of the
business. Companies who do not pay dividend to their shareholders are constantly

expanding and growing because they invest shareholder paying amount in the expansion
of the company. In case of SAIN'SBURY, this policy helps the SAIN'SBURY business to
grow and expand their business by retaining the total earnings and invest that amount for
the growth and expansion of business. Shareholders invest in company by knowing that
there is no dividend policy, but their main aim to invest in company for the appreciated
stock value because foe the investors appreciated value of stock is more important rather
than the regular dividend (ohnson, Horrocks and DeFrain, 2019).
Analysis of efficient market hypothesis theory in context of SAIN'SBURY
Analysis of SAIN'SBURY on efficient market hypothesis by analysing the current
trading of share, performance of portfolio, strategies and transactions provides the clear
information of the business. Only with the help of information which public knows already about
the business then SAIN'SBURY cannot effect the market situation this is because all the
information market made available for the shareholders which can affect the price of the share in
the market.
Types of Efficient Market Hypothesis:
There are mainly three types of efficient market hypothesis:
 Weak Forms: The weak form states that the current prices of stocks highlight the all
available public information, and also the history of share prices. In case of
SAIN'SBURY, their shareholders are not able to generate the profit from the information
that is available early in the market. That effects the SAIN'SBURY business in which
their company cannot compete in the market on the basis of previous share prices. In
technical analysis weak form gives challenges in making decisions regarding trading,
because who’s trading mainly relates with the previous price of stocks (McKinnon,
Panchapakesan and Leung, 2021).
 Semi-strong Forms: Semi-strong efficient market hypothesis states that share of market
price are associated with some of the information pieces that are available publicly. This
information can be economic factors, financial statements, which are reflect in the stock
prices. Prices of shares are maintaining and adjust according to the data which publicly
available. In case SAIN'SBURY for the fundamental analysis it is difficult for the
business to earn profit only by analysing the fundamentals shares.

 Strong Forms: Strong firms efficient market states that information regarding the stock
price were associated with existing information that can be in private or public firm, this
indicates that the SAIN'SBURY shareholders only by trading cannot able to earn profit
only on basis of information by insiders (Lee, Lown and Allgood, 2019).
Methods of Projects Appraising in SAIN'SBURY
There are basically four method of project appraisal:
 Net present value: The method of net present value refers to the tool that helps in
analysing the project profitability. In relation to SAIN'SBURY, with the help of this
method company can analyse the inflow and outflow of cash in future, and also help in
analysing the expected profit and loss from specific project. It basically considered the
money time value, inflow and outflow of cash, and risk. It helps the SAIN'SBURY
manager to finance the long-term inflow and outflow of cash.
 Payback Period: This method analysis the recovery needs of the original capital invested
in the project. This indicates the time length needs for the recovery of initial cost on the
projects. The main element of this method is recovery time calculation, by the collection
of inflow of cash, at that when the inflow of cash gets equal to the original amount of
investment.
 Internal rate of return: It refers to the discount rate which is used in projects. At this
rate the net present value is equal to zero. SAIN'SBURY can use this method because that
brings equality in the future cash inflows and project cost (Holina, Orobinskiy and
Sichev, 2019).
CONCLUSION
From the above report, international financial management plays a very essential role in
management of finance in the business. SAIN'SBURY we analyse the different dividend
distribution policies which are used by the organisation for distributing a certain amount to their
shareholders and also some of the tools of efficient market hypothesis which evaluate the main
three elements weak forms, semi-strong forms, and strong forms, all these are used to analyse
and forecast the planning for the future and making efficient decisions. It helps in analysing the
all-important information about the price of various services and commodities, with the proper

effective strategies and planning SAIN'SBURY make easier for their business to manage and
handle overall management of finance internationally effectively as well as efficiently.

REFERENCES
Books and Journals
Dimitriou, D. and Kenourgios, D., 2019. Financial crises and dynamic linkages among
international currencies. Journal of International Financial Markets, Institutions and
Money, 26, pp.319-332.
Holina, M.G., Orobinskiy, A.S. and Sichev, R., 2019. Ensuring financial stability of companies
on the basis of international experience in construction of risks maps, internal control and
audit.
Laeven, L., 2020. Does financial liberalization reduce financing constraints?. Financial
management, pp.5-34.
Lee, T.R., Lown, J.M. and Allgood, S.M., 2019. Financial management, financial problems and
marital satisfaction among recently married university students. Journal of Financial
Counseling and Planning, 11(2), p.55.
McKinney, J.B., 2020. Effective financial management in public and nonprofit agencies.
greenwood publishing group.
McKinnon, J.L., Panchapakesan, S. and Leung, M., 2021. The influence of culture on
organizational design and planning and control in Australia and the United States
compared with Singapore and Hong Kong. Journal of International Financial
Management & Accounting, 5(3), pp.242-261.
ohnson, A.C., Horrocks, A.M. and DeFrain, J., 2019. Financial management practices of couples
with great marriages. Journal of family and economic issues, 32(1), pp.27-35.
Walker, C.M., 2019 Financial management, coping and debt in households under financial
strain. Journal of Economic Psychology, 17(6), pp.789-807.