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A proper financial management strategy is one of the key tools for successful marketing and financial performance. In general, financial success is closely linked with the principles of financial management performance, hence, it is the key aspect of a company’s performance that defines the effectiveness of financial resource allocation, financial flow management, and share price control effectiveness. The aim of this paper is to analyze the financial management principles of the Dixons Retail PLC, including financial information, income statements, cash flow statements, and balance sheets.
The role of financial management can not be overestimated, however, wrong actions may cause the failure of the entire financial structure. The instance of Dixons Retails clearly reveals the instance of improperly implemented financial management strategy, as regardless of the stable share price for the recent three years, the financial benefits of the company have decreased essentially by November 2010.
Investment values of the company have changed sufficiently. In general, there are several factors: the world credit crisis 2008 became the important impulse for share price failure. Another factor is the issuing of the additional share volumes for the share market, which caused the depreciation of the shares in general (December 2008, 9.49) that became the reason for the investment shortage, as shareholders wished to save their reserves, and preferred to sell the shares. Actually, the share price returned to the previous values in three months (April 2008, 43), however, the values of the years 2006 – 2007 (the highest value ‑ 217.75) are unachievable.
Furthermore, these changes promoted slight changes in the financial structure of the company, as there was a necessity to consolidate the financial reserves of the entire group. These changes are associated with the net funds. They were restructured for adapting the company for the debt financing, as the company is unable to operate with the equity-based structure at the moment (net fund values: May 2009 – £ 50.1 million; May 2010 ‑ £ 477.5 million debt) (DSG International, 2010)
As for dividends paid, 2010 reports do not involve the information required, however, the estimates are not very satisfactory, as the borrowings have 75% increased in comparison with 2009. The 2009 dividend payments totaled £ 60.3 million, while the 2008 rates were £ 160.8 million.
Market Values and Financial Data of the Company
(McMenamin, 2004; Khan and Hildreth, 2004; Brockman and Michayluk, 2007).
Task 3
Actually, the company can not be regarded as the best solution for investment, as the financial data reveals a shaky position on a share market. In general, the situation is featured with the extensive (most probably artificial) keeping of a share price on a dignified level, however, the stability of the price per share is doubted essentially. This is closely linked with the restructuring of the financial strategy of the company, as the necessity to provide a debt-based structure signifies that the trust of the shareholders is violated. (Backman, 2004; Turkington and Walsh, 2003)
As for the shareholders who are on the directors’ board, it should be emphasized that they are in the most beneficial, and the riskiest positions simultaneously. While the actual success of their position is closely linked with the shareholder’s equity investment, provided in the company, however, the return per share has decreased essentially by 2009. Considering the fact that some 2010 values are higher, the company’s debts are not decreasing, and the return per-share value is rather low. Though some recovery symptoms are notable, hence, the credibility of their further success is not too low. (Filbeck, 2006)
The company’s share price was influenced by several factors. On the one hand, the share price failed in 2008 after an attempt to stabilize the market position by issuing additional shares, on the other hand, the reason for this failure is associated with the aspects the of company’s financial structure. In general, companies with debt-based financial structures have lower share prices. Additionally, the incomes of the company have lowered by 2008 – 2009; hence, the dividends have become lower, which inevitably caused the decrease of the share price. (Coyne and Witter, 2002)
The financial management principles of any company are closely associated with the aspects of financial performance and control over financial parameters, including flows and shared equity is one of the key financial resources available for companies, nevertheless, the actual value of the share price may be defined only after an in-depth assessment of the company’s financial data and parameters.
References
Backman, J. 2004. Price Practices and Price Policies: Selected Writings. New York: Ronald Press.
Brockman, P., & Michayluk, D. 2007. The Holiday Anomaly: An Investigation of Firm Size versus Share Price Effects. Quarterly Journal of Business and Economics, 36(3), 23.
Coyne, K. P., & Witter, J. W. 2002. What Makes Your Stock Price Go Up and Down: Identifying and Understanding Important Individual Investors Can Help Corporate Executives Predict the Direction of Share Prices. 29.
DSG International, 2010 Annual Report and Accounts 2009/10. DSG international plc. Maylands Avenue Hemel Hempstead.
Filbeck, G. 2006. Institutional Ownership and Share Price Responses to Announcements of New Common Stock Issues of Bank Holding Companies. Quarterly Journal of Business and Economics, 35(3), 66.
Khan, A. & Hildreth, W. B. (Eds.). 2004. Financial Management Theory in the Public Sector. Westport, CT: Praeger.
McMenamin, J. 2004. Financial Management: An Introduction. London: Routledge.
Turkington, J., & Walsh, D. 2003. Price Discovery and Causality in Share Price Index Futures Market. Journal of Management, 24(2), 97.
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