Financial Management Questions

Q5. Putting yourself in the position of an existing stockholder(investor) of your company, using both the yearbook corporate report and the data about your companys share price in the Financial Times, provide a recommendation (with reasons) whether you rate your companys shares as Buy, crack or Sell. There are a wide range of factors that affect share price. These include interest place, inflation, the motion of the industry/sector the company is in, the performance of the company itself, and the market supply and demand for the companies shares.The following graph shows tag and Spencers share price everywhere the last 12 months. http//corporate. marksandspencer. com/investors/shareprice/chart Accessed 05/12/11 By viewing the graph, we can see that there have been numerous fluctuations in share price over the last 12 months. At the start of the year share price was at around 370 pence per share and dropped down to around 330 pence per share after 3 months. There was then a surg e in share price which reached over 400 pence per share at its peak in May.It then fell to its lowest point, just supra 300 pence per share in September and there have since been small fluctuations in share price. Its current share price is at 329. 00 but we command it to continue to fluctuate slightly before finally increasing again into the New Year, as share prices do generally remain low over the Christmas period. The following table is share information that was published in The Financial Times weekly update on Monday 5th declination 2011. Price Wks% Chg Div Div Cov Mcap ? live xd Marks&Sp 330. 10 +7. 3 17 2. 3 5,233. 3 16. 11 Using the data getable from this table and information published in the annual company report, we can work out dividend yield and dividend cover. Dividend yield tells you the percentage cash return on the investment, and can be directly compared with interest rates and other investment opportunities. It expresses the dividend per share as a perce ntage of the current share price (McKenzie, 2010385).It is therefore worked out by dividing the dividend per share which is 17 pence, by the current price by share, which is 330. 10, and then multiplying the answer by 100. The dividend yield can then be worked out as 5. 17%. This would therefore be a worthwhile investment considering many interest rates for banks are less than 1%. The dividend cover measures how many times the dividend could be paid from the available profits (McKenzie, 2010384). The financial times reveal that the dividend cover is 2. 3, and therefore the dividend could be paid 2. 3 times out of Marks and Spencers available profits.This shows that Marks and Spencer are using quite a substantial amount of profit to pay out dividends, nearly half. This may be rewarding for a shareholder looking for a quick return, however, shareholders who are looking to invest in Marks and Spencer in the long run may find it more safe if Marks and Spencers reinvested their profits into the business. Taking everything into account, we would recommend a shareholder to hold their shares, as we believe that there will be a rally in share price in the coming months, so they will therefore make a better return if they do wish to sales event in the future.The dividend yield shows that Marks and Spencer offer a good return on investment, compared with other alternatives such as bank interest rates. And also they aim a considerable amount of their profits to pay shareholders dividends, so we believe it would be worthwhile holding onto the shares for the time being at least. Financial Times, Monday December 5 2011, p. 26 McKenzie, W. (2010) Using and Interpreting Company Accounts. FT Prentice Hall. p. 384-385