Brunswick profitability ratio

Evaluation of the profitability of Brunswick PLC

The profitability ratios provide an idea under which the company operate. It's trading activities. It allows a move specific analysis of profit margin example expressing individual expenses as a proportion of sales or cost of sales. Those ratios will identify any irregularities or changes in specific expenses from year to year.

Gross profit percentage.

The formular of gross profit percentage can be expressed as the amount of gross profit for emery £ 100 of sales.

The profit percentage shows the company's profit before charging any ratios for Brunswick PLC during the year 2007 2008 represent 16.67% and 14.22% respectively. This means for every £100 units in turnover £510 and £599 gross profit was made before any expenses were paid. If you look at the two percentages 2007 appears to be slightly higher than that of 2008, these different may be caused by the numbers of reasons such as Geographical location of the business under which it operate, Discounted operations, introduction of a new products. Each of these reasons will be discussed below at length

Sales growth.

Brunswick PLC has a numbers of subsidies of which they are located in different countries. In the year 2008 the group sales grew by 17% to £ 599m compared that of 2007 which £510mthe growth of sales of £599m was not enough to keep pace with the inflation as a result the profit for the year 2008 was not good enough.

  • Continuing operation and introduction of a new venture.

The continuing operation of an entity can bring about the favourable or unfavourable result on the profitability in our case Brunswick PLC had up and down in the profitability ratios between in question. From the chairman statement addressing the shareholders in the final report of 2008 he emphasis that, increase of the group sales by 17% but capital expenditure amounted to £7.347m (£475,000), profit before interest and Taxation only grew by 4% to £ 33.7million, which was impacted adversely by much slower than anticipated growth of prepared salads in the summer and also by higher than expected start up costs of new ventures.

  • Sales/dispose of the Fixed Asset

From the continuous operation of Brunswick PLC, we have seen the directors decided to dispose of its investment for a cash consideration of £500,000 as part of the disposal of the feed milling business, the book value of £ 77.637m and 78.808m respectively which boost up the profit figure for the year 2008. However I will be surprise to learn that the profit figure from the table shown that 2007 and yet still the gross profit percentage of 2007, this is because of the high significant cost inflation see page 9 (annual report and Account 2008). This results the increase of cost of sales. Raising raw material prices in the second half of the year and the devaluation of sterling against the euro.

Written off of fixed cost:

We also hearing that in the year 2008, see page 50 the notes to the account there was a written value of fixed asset amount to £5,539m, ended this could be one of the reason that the gross profit went down, it means the company made lower margin out of their sales. If you look at the calculation on the amount of turnover required to keep pale of inflation.

Profit before Tax

The group profit before Tax of the year 2008 is £33.722m higher than that of 2007 £32.375million millions the difference of £1.347million of 2007 is because of the numbers of reasons such that

Increase of Sales:

We can see from the Annual report and account of 2007, page 9 that the sale grew by 17% to £599.0million which was supported by a step jump in demand in our whole head produce business as we become a sale supplier to one major customer. It has been also highlighted that profit before interest and taxation grew by 4% to 33.7million. The usual profit growth was held back both by the impact of the sudden fall in salad sales growth over the summer and two new start up taking longer to achieve their targeted returns than planned

Return on Capital employed.

According to (Elliot and Eliot, 2008) return on Capital employed is fundamental measure of management efficiently because it contrasts the net profit generated in the organization summation of its assets, and it may assumed manaded. In evaluating the ratios of Brunswick PLC, we will look at the following areas to justify the reasons for the changes:

  • The liability position of the company
  • The position of the Assets
  • Position of the creditors.

The returns on capital employed percentage of Brunswick PLC is 11.87% in the year 2008 while that of 2007 is 12.72% the possible reason for this difference can be:

  • Financial liabilities

From the annual report and account for the year (2008). (Page 65) we can see very clearly how the borrowing figure affects this Brunswick plc two different years.

For example the total borrowing for the year 2008 was £78.385million compared to £75.909million in the year 2007 this can be one of the reason caused the high rate of return on capital employed in the year 2008.

Also the Assets of the Company have been improved between the two years because of the policy that they adopted (IFRS). See on page 36 annual reports and account 2008 fixed asset investment was increase by £210.477million in 2008 and £197,797million in 2007. Deferred income by £7.463 million in 2008 and £6.159 million in 2008. Also increase equity and shareholders fund.

Asset turnover

Asset turnover is measure of how much sales are generated by the capital asset (fixed asset and current asset) base of the company. Asset turnover ratio increase from 1.75 previous years to 1.85 in 2008 due to Brunswick Plc managed well used its fixed asset and current assets to generate sales. Assets turnover ratio can act as a good guide to company performance.

Price earnings ratio

The price earnings ratio compares the amount invested in one share with the earnings per share. It may be interpreted as the number of years for which the currently reported profit it represented by the current share price. The p/e ratio reflects the marker's confidence in future prospects of the company. For Brunswick point of view P/E ratio is 9.21 in 2008 and 18.73 in 2007. This indicates 2008 there were short period for which the market believes the current level of earnings may be sustained. The lower p/e ratio in 2008 reflects the low share price in line with the performance of the whole market in 2008, both relative are existed. Reflecting the dividend opinion and uncertain forecast for the Brunswick Plc future in this year.

Dividend Yield

Dividend yield is simple ratio comparing dividend per share with the current market prices of a share. It indicates the relationship between what investor can expect to receive from the share and the amount which is invested in the share. Many investor need income from investment and the dividend yield is an important factor in their decision to invest in, or remaining in, a company. Dividend yield 3.88% in 2008 and 1.93% in 2007, this indicate bad signal to investor to invest in or to remain in, in the company. This outcome due to decrease in share price in 2008. Investors buy shares in expectation of increase share price. So the directors of Brunswick should take the view that the dividend yield should be adequate to provide an investment income, but it is the wealth arising fro retain profits that is used for investment in new assets which in turn generate growth in future profits.

Creation of shareholder wealth for the last two years

Annual return the share price performance can be analysed by time series comparison and benchmark comparison. The time series comparison will have little value if not comparing with some benchmark. In this assignment, Brunswick plc annual return will compare to FTSE all share index performance. In 2007, Brunswick's share price hugely reduce from the closing price in 31st march 2006 940p (assuming the closing price = opening price) to 31st march 2006 631.5p and the annual loss by 43.1%.however it is still over performed out the market performance which has gained 52.42%. In 2008, Brunswick keeps this strong performance in line with the market growth rate, however, after 2008, Brunswick's share underperformed to the market by lower return rate, Brunswick's 32.67% loss comparing to the market in previous year, return indicates a huge performance gap.

Agency issues

Objectives of Shareholders

The main objective of shareholders is often assumed to be seek the maximisation of their wealth, subject to taking an acceptable amount of risk. In practice shareholders may have multiple objectives which include social and environmental considerations. Shareholders' wealth is increased through the cash they receive in dividend payments and the capital gains arising from increase share prices. It follows that shareholder wealth can be maximised by maximising purchasing power that shareholders derive through dividend payments and capital gains over the time.

Objective of the executive management board of Brunswick Plc

The objective of Directors of Brunswick's do not automatically correspond with those of the shareholders. Directors of Brunswick Plc seek to maximise their own income and/or wealth, which could be at the expenses of shareholders, to increase work related benefits such as cars and pension scheme, to increase power and prestige, or to generate job security. The amount of risk of Brunswick Directors are prepare to take is significant differ from the desired risk of shareholders, especially shareholders that own a well diversified portfolio.

To some extent the actions of directors should correspond to the objectives of shareholders as shareholders, at least in theory, have the right to replace directors if they are not satisfied with the directors performance. In practice, unless major shareholders act in unison, the removal of directors may not be easy. Directors may, however, be influenced by market forces to take actions that results in a high quality performance of the company. If they do not, and if the market in which they operate is at least semi-strong form efficient, the share price of the company will fall and the company will be more exposed to takeover bids. This could result in the directors losing their positions. If the market is not efficient, poor or self-motivated decision making by directors may not feed quickly and accurately into changes in market price.

Shareholders may try to encourage the objective of directors to correspond to their own through a variety of incentive schemes, such as performance related remuneration, or share option schemes. The idea is that the directors will benefit from the same positive corporate performance as the shareholders, and thus have the incentive to take decisions which lead to the best possible performance.

There was conflict (Agency issues) between objective of Management board and Shareholder of Brunswick Plc because of this reason;

The agency problem is said to occur when managers make decisions that are not consistent with the objective of the shareholder wealth maximisation. Three important features that contribute to the existence of the agency problem within the Brunswick Plc as follows;

  1. Divergence of ownership and control, where by those who own the company(shareholders) do not manage it, but appoint agents (managers) to run the company on their behalf
  2. The goals of the managers (agents) differ from those of the shareholders. Human nature being what it is, managers are likely to look to maximising their own wealth rather than the wealth of the shareholders.
  3. Asymmetry of information exists between agent and shareholders. Managers, as a consequence of running the company on a day to day basis, have access to management account and the financial reports, which may be subject to manipulation by the management.

These three factors are considered together on the Brunswick Plc, it should clear that managers are in a position to maximise their own wealth without necessary being detected by the owners of the company. Asymmetry of information makes it difficult for shareholders to monitor managerial decisions, allowing managers to follows their own welfare-maximising decisions on Brunswick Plc.

Also there are misunderstand in Prestige empire building between them, there are no transparent on Remuneration level, are well designed directors remuneration packages for executives would motivate them to make decisions consistent with no objectives of shareholder. Complacent in good times; may want to engage in activities that enhances results, even if they activities are considered unethical, example trading with directors, testing product on animals, emitting pollution, spying against competitor etc.

Creative accounting; Directors not chosen accounting standard and future using effectively with current details available such as accounting standard in order to supply accurate and reliable explanation by compliance with laws at accurate time. All information should be meet the requirements of international financial report standard in order all application of transaction to be known. Also it required to explain if organisation not complied with IFRSs, subject to any material departures.

Risk attitude Business and Financial risk; The Group annually not carries out a formal exercise to identify and assess the impact of risks on their businesses and the exercise has recently been reviewed. The more significant risks and uncertainties faced by the Group, in line with the rest of the food manufacturing sector, were not identified as customer retention, food scares, raw material prices, margins and profitability, and competition. The corporate governance report on pages 68 to 71 were not describes more about the Group's risk management processes.

Reaction to takeover; there were conflict between directors and share holder on takeover bid, directors in Brunswick Plc defending company against takeover bid for the aims of protect their jobs, due to once company is going to take over so there may be changing of management, that's why they afraid to lose their post after company been take over.

Components of the executive directors' remuneration

  1. Hierarchies of decision making
  2. Performance Monitoring and evaluation system
  3. Reward system
  4. Share Option Schemes (ESOPs)
  5. Bonus

Components contribution of Goal Congruence

1. Hierarchies of decision making

Brunswick Plc use Hierarchies of decision making in order to control abuse power, and the decisions must be distributed between these stages in order to achieve Goal of Congruence;

  1. Full board strategy/investment
  2. Individual executive directors operational issues
  3. NEDs (non-executive directors, such as audit committee and remuneration committee
  4. Specific group of shareholder, example preference shareholders of dividends in arrears

2. Performance Monitoring and evaluation system

Goal Congruence will be achieved if the following measure is emplacing on the Brunswick Plc;

  1. To concentrate managers efforts on shareholder concern
  2. To indentify under performance, then to find the way to boost the performance on future in order to generate profit and to create shareholder wealth
  3. Resource allocation; to modify or increase resources on the location/department if needed, as well to upgrade new system in order to fast production

3. Reward Schemes

Goal Congruence can be achieved by Reward Schemes, directors/managements reward schemes often consist basic salary, + bonus + share options. Some companies believe that pay high remuneration to attract the best. Link between high remuneration and performance no proven paying more than going rate to inflation in director pay.

Brunswick Senior management reward scheme should encourage maximization of shareholder wealth cannot be manipulated, to encourage long term view, not excessive, commensurate with effort and skill, reflects profits cash generated and in MNE must reflect local practice, culture, tax rates, transfer pricing issues encourage same degree of risk preferences. For the lower levels of managements of Brunswick may be best linked to specific target example successful implementation of a computer system.

Reward scheme can achieve Goal of Congruence in Brunswick Plc if become;

  1. Be easy to monitor, clearly defined and impossible to manipulate by managers
  2. Be linked to changes in shareholder wealth
  3. Match managers' time horizon with shareholder
  4. Encourage similar attitude to risk of managers and shareholders.

4. Share Option Schemes (ESOPs)

One way by which managers of Brunswick Plc, and sometimes employees in general, might be motivated to take decision/engages all activities in arranging order with maximization of shareholders in through ESOPs. ESOPs will not, however, assist in encourage goal congruence between other interest groups and the shareholders and the managers.

ESOPs allow managers to purchase a company's shares at a fixed price during a specified period of time in future, usually a period of years. They are aimed at encouraging managers to take decisions which will results in high NPV projects, which will lead to an increase in share price and shareholder wealth. The managers are believed to seek high NPV investments as they, as shareholders, will participate in the benefit as share price increase.

There is, however, little evidence of a positive correlation between share option schemes and creation of extra share value. There is no guarantee that ESOPs will achieve goal of congruence. Share option will only be part of the total remuneration package and may not be major influence on managerial decisions. If share prices fall managers do not have to purchase the shares, and the value of the option to buy share becomes worthless or very small. This means that managers face less risk than shareholders as they have an option which may be exercised if thing go well, but may be ignored if thing go badly. Shareholders have to face both circumstances. Managers may be rewarded when share prices increase due to factors that have nothing to do with their managerial skills. Additionally ESOPs schemes often base reward in part upon earnings per share, an accounting ratio which, at least in the short term, is subject to manipulation by managers to their advantage. Although ESOPs may assist in the achievement of Brunswick's goal congruence, they are by no means s perfect solution

5. Bonus

Bonus is among of the award scheme, employees can receive bonus at the end of the year if the company made profitability. The Goal Congruence is being achieved if;

  1. Bonus based on a minimum level of pre - tax profit
  2. Bonus linked to the Economic Value Added
  3. Bonus based on turnover growth.

P0 = 424.88p

Over 2008 Brunswick Plc share range as high as 945p and as low as 495p. So there were times when investor were more optimistic than we have been in the above analysis, perhaps they were anticipating a faster rate of growth in future than in the past or judged the risk to be less, thus lowering ke. On other occasion's investor were more pessimistic, seeing Brunswick's share as sufficiently risk to require a rate of return higher than 10 percent per year or anticipating lower future profits and dividend growth. (Glen Arnold 2005)

Possible reason for the difference between intrinsic values to the current share price.

The actual closing share price on 31st march 2008 is 515p which differ from the estimated price 424.88p by using DVM; the possible reasons are explained as follows:

The actual current price can be influenced by some short-term factors, such as takeover bid which can considerably distort the estimate of the cost of equity.

DVM said an individual holder of share will expect two type of return;

  1. Income from dividend
  2. A capital gain resulting from the appreciation of the share and sale to another investor

The reason for this is that when a share is sold, the purchaser is buying a future stream of dividend; therefore the price paid is determined by future dividend expectations.

Dividend growth rate this model use past figure from 2004 2008 to calculate the average growth rate and use to forecast the dividend payment. The historical dividend paid out illustrate Brunswick's dividend was not paid out by constant growth rate, therefore, use the average growth rate cannot forecast accurately and is not practical because a small change in the estimates of growth may give a very different share price. For example, increase dividend growth rate by 1% for Brunswick will cause share price to increase. The share price is lower 424.88p as compare the actual one of 515p on required return on equity of 16%, this may be the required of return is calculated by using CAPM which build in containing many imaginations in realistic, others of which are not.

Brunswick financial risk comes due to low gearing percentages and the lower the interest cover ratio, the lower gearing of 50.49% in 2008 indicates a low exposure to financial risk because there would little difficulty in paying loan interest and repaying the loans as they fall due. Gearing of 55.88% in 2007 indicates a high exposure to financial risk and company was badly condition in repaying there loan interest and loan was due, as well high possibility of company to face bankrupt. Financial risk occurs the way in which the company finances itself. So Brunswick plc should take strategic measure to reduce the gearing percentages in order to escape financial financial risk of the company.

The lower the interest cover ratio 7.88 (2007) and 8.25 (2008) the greater the chance of interest payment default and liquidation of Brunswick plc. The inverse of interest cover measure the proportion of profits paid out in interest. The importance of being able to meet interest payments on borrowed funds is emphasised by measuring gearing in term of the profits and loss account. If the profits generated before interest and tax is sufficient to give high cover for the interest charges, then it is unlikely that the Brunswick is over committing itself in its borrowing. If the interest cover is falling or is low in 2009, then Brunswick there may be increasing cause for concern. But interest cover slightly increase from 7.88 to 8.25 in 2008 still is not enough for Brunswick plc to escape payment default or liquidation.

Method of calculating free cash flow of Brunswick for the year ended 31/03/2008

Free cash flow is defined as credit or money remaining after deducted all responsible charges and can use for future plan of investment (i.e. replace capital expenditure). In case of Brunswick Plc should retain money within the company to invest in any project which will produce a return greater than the investors' opportunity cost of capital. Any cash surplus to this should be returned to shareholders.

Examination of change of gearing

The question that we wish to examine is whether or not company's gearing ratio can affect its total market value. It should be clear that changing a company's gearing ratio will affect its total market value only if it causes changes in either the company's annual net cash flow or its weight average cost of capital. From Brunswick Plc I can argue that changing the gearing ratio of a company was not affect either of these factors, through the explanation on the basis of calculation below of WACC and Corporate Value;

Changing the gearing ratio cannot have any effect on the Brunswick's annual cash flow, as that is determined by the assets in which the Brunswick's has invested, and not by how those assets are finances. The only effect that changing the gearing has on the Brunswick's annual cash flow is that it changes the proportion of the cash flow that are paid out as dividend and interest, the more highly in 2007 gear the Brunswick, the greater is the proportion of its annual cash flow paid out as interest and smaller the proportion paid out as dividends. However, changing the level of gearing was not change the level of the annual cash flow, but just how it is split between debt and equity holders. (Lumby and Jones 2003)

Changing the gearing ratio was also not affect the value of weight average cost of capital. The Brunswick's weight average cost of capital reflects the average return required by the suppliers of the capital. Its level is determined (as in any rate of return) by the degree of systematic risk in the Brunswick's overall cash flow. There is no reason why changing the gearing ratio should affect the systematic risk of the cash flow being generated by the Brunswick's assets, and hence we have seen on calculation below that, changing the gearing ratio was not affect weight average cost of capital.

From this analysis I can draw two important conclusions. The first is that simply changing a company's capital structure cannot (by itself) change the company's total market value. Thus company's can only enhance their shareholder's wealth by making good investment decisions. The financial decisions (through which a company's capital structure or gearing ratio can be changed) cannot affect shareholder wealth.

The second conclusion is that Brunswick's assets display the same degree of systematic risk can be expected to have the same weight average cost of capital, even though they may have entirely different gearing rations. This is because it is the systematic risk of the Brunswick's collection of assets which determines its overall return of weight average cost of capital.

The assumptions of the above analysis are;

  1. At any given level of risk, individuals and companies can all borrow at the same rate of interest, which remains constant regardless of the gearing.
  2. There are no costs attached to market transactions, the supply of information or the process of bankruptcy.
  3. There are no difference between corporate borrowing and personal borrowing in term of risk (e.g. there are no limited liability advantages for companies)
  4. There is no taxation.

Companies with the same level of business risk should, in equilibrium, have the same weight average cost of capital. Changes in a company's gearing ratio should leave its WACC unchanged. The increased return required by ordinary shareholders that arises out of an increase in gearing represents the compensation required for bearing additional financial risk. Perhaps most importantly, the analysis leads me to conclude that the financing decision is relatively unimportant. It can have no bearing on the value of the company and so does not affect the wealth of ordinary shareholders.

In respect of the statements, the MM analysis can be couched in very simple term: as a company increase its gearing, two effects occur. The first is that the company gains an advantage in the debt capital is cheaper than equity capital. The reason for this is that debts is a low risk security than equity as debt holders get preferential 'payout' treatment, hence debt requires a lower expected return. The other effect is company incurs a disadvantage in that the expected return required by equity capital increase. This is because increasing the gearing increases the financial risk held by equity and so forces up the required expected return, by way of compensation.

These effects the advantages and the disadvantages are two different sides of the same coin. They both arise through the same phenomenon; debt holders are paid before equity holders. Therefore it is not surprising that the two effects exactly cancel each other out, so that the net effect is zero; changing the gearing leaves the company's total market value and its WACC unaltered. And from this calculation we have seen the lower the WACC, the higher the total value of the company and vice versa.

Working Analysis

From > WACC = Ke Ve + Kd(1-t) Vd

Ve +Vd

Where by:

Ke = Cost of equity

Kd = Cost of Debt

Ve = Value of equity

Vd = Value of Debt

The company's existing gearing is 23,603,480 equity to 31,811,000 debt or 43%equity 57% debt.

A change in gearing will result in a change in the equity beta. Assuming the beta of debt is zero, the equity beta with no gearing may be estimated by;

From CAPM, Ke = Rf + (Rm Rf)beta

Given Rf = 4.5%, Rm = 14%, Ke = 16% from question 1(c) and beta = ?

16% = 4.5% + beta (14% - 4.5%)

Solve, beta = 1.21

Beta Ungearing = beta geared x EE+D1-t or 1.21 x 4343+57(1-0.30) = 0.6276

If gearing was 60% equity, 40 debt by market values, the 'ungeared' beta may be 'regeared' to find the new equity beta is;

Beta geared = beta ungeared x E + D(1-t)E or 0.6276 x 60 +40(1-0.30)60 = 0.920

Using CAPM, Ke = Rf + (Rm Rf) beta or 4.5% + (14% - 4.5%) 0.920 = 13.24%

If gearing was 40% equity, 60% debt by market values, this may be 'regeared' to find the new equity beta is;

Beta geared = beta ungeared x E + D(1-t)E or 0.6276 x 40 +60(1-0.30)40 = 1.28658

Using CAPM, Ke = Rf + (Rm Rf) beta or 4.5% + (14% - 4.5%)1.28658 = 16.7225%

Kd(1-t) = 7(100-30)%, 8(100-30)%, 10(100-30)%

= 4.9%, 5.6%, 7%

Ke = 13.24%, 16.7225%

Weight average cost of capital at 60% equity, 40 debts is;

WACC1 = 13.24% X 0.60 + 4.9% X 0.40 = 9.904%

Weight average cost of capital at 40% equity, 60 debts is;

WACC2 = 16.7225% X 0.40 + 7.0% X 0.60 = 10.889%

The existing cost of equity is; 4.5% + (14% - 4.5%) 1.21 = 15.995% (appr.16%)

The existing WACC is 15.995% x .43 + 5.6 x .57 = 10.06985%

The two alternative capital structures are expected to increase the cost of capital from its current level.

Working Analysis;

Free cash flow = 25.870 millions (calculated from part- a - of the question)

Corporate Value (Value of Company) = Future Cash Flow or (Free cash Flow)Cost of Capital WACC

Corporate Value1 (60% equity, 40% debt) = 25.8700.09904% = 261.21million

Corporate Value2 (40% equity, 60% debts) = 25.8700.1006985= 256.91million

Altering capital structure to either of the two suggested levels is expected to reduce corporate value from its current level of 554.14480 million to 518.12million (261.21+256.91). I recommended that the capital structure is kept at its current level of 43% equity, 57% debt.

Capital structure strategy

General information of Capital structure

There are two essential things to be considered:

  1. Value of a company, and hence shareholder wealth, be increased by varying the capital structure
  2. Effect of capital structure have on risk

Values would be essential to consider when we select capital structure; the organisation must find the way which can deliver the maximum, in the case which can boost the other strategies in the line of targeted time.

The factor and essential for organization to consider its values is not included, but there are some arrangement in a time organisation make profit, example they can minimise the cost of capital by make application on its debt, this is supported by M&M. Meanwhile maximum level of debt create more difficult due to organisation will face maximum amount of gearing and it is better to consider on the risk assessment in order to avoid economic downturn to the organisation by lost costumers and other stake holder due to economic distress of organisation. And these stake holders they can find another loophole to go to invest or do business which is easier and affordable business agreement.

Normal expectation of capital structure was gearing increased and weight average cost of capital minimal. But in fact amount of gearing the harm of all stakeholder and dividend received by them are raised and automatically raised weight average cost of capital. But it may be relief on debt and compensate any investment loses. Also maximum capital structure depends on many ways such as company management strategy and how they tackle risk faced. In theory we can see organisation which have good growth such as R&D automatically minimum gearing.

Invasion in taxation to the capital structure was not well explained; however some stakeholders are worried about their cash received from their investment. Worried if unequal taxation treatment to unsimilar capital. So stake holder can request favour in the basis of capital

Some organisation assumed hold a high capital structure, in example of US and UK gearing look to be minimum than should be. Some organisation try to rich the maximum capital structure, it suppose to remind that it take huge time to accelerate from stage one to another of capital structure. This movement shall not compare with cost of debt or equity because these can change straight forward. It is very important to company to have lower capital structure.

Company should put in its strategy that capital structure should be lower. Company should arrange and adapt good strategy in light of capital structure such as using pecking order theory, which normally consist all communication available at that time. Remind that management dealing all governance and have proper information about organization profile than other stakeholders. This make organisation to use its finance in proper ways as planned to its strategy. Company can use its external finance when thinking to generate positive net present value (Positive NPV) in future prospective, organisation should use the cash generated to finance future investment

  1. Internal funds (including selling marketable securities)
  2. Debt
  3. Equity

In light of external finance using it suppose to make comparison to internal finance because capital structure normally it weighs investment to do with internal fund organisation hold. Also we can see capital structure well dealing with management strategy, the way manager act on it. In another case we find some miss understand between agent who is directors and owner who is shareholder as result agency problems. Capital structure involved all level of organisation and the main responsible is senior managers. Managers required finding out the way to make all debt in the security. Cash generated can well effective using on the investment which matched together with company's strategy instead to thing back to share holder. But in agency issues point of view may little adhere with capital structure as well poor information relating capital structure strategy.

There many information talking invasions of capital structure on cash flows seemly regarding investors than other stakeholders. Such as when we look security in deep we can find out is strong criteria needed by investor to consider before making any decision to invest, this security are liquid. Also we can find out security dealing with company these are transaction cost which somehow may reduce misunderstanding between agent (Directors / managers, shareholders and people who finance debt.

In the case of Brunswick Plc, Capital structure we can define as the mergers of debt and equity that funds an Brunswick's long-term plan. Capital structure of Brunswick's management can be achieved consideration targeting budget of all relevant expenses in order to boost the Brunswick's financial sound. The main aim of management capital structure is to focus on capital requirement in order to fund future growth as the result of well finance performance. Target level of capital structure would be reach by Crabsticks Plc well effective dealing with these steps.


To prepare proper procedures to deals with for Company Capital Structure. The important to have strong foundation of organisation level of capital structure such as providing training, group working and to take care anything which can harm the organisation objectives. Training should be adapted in all level from bottom to the top by well convincing stakeholders.


To weigh out Debt Capacity level the amount of debt a Crabsticks Plc is required to dealing in among of credit rating, in order to boost debt level of the capital structure. Amount should increase accordingly if the wants Crabsticks Plc will be in strategy and good performance. "The amount of debt available has to be equivalent with capital expenditures budgeted. Any other spending must Brunswick's affordable in order to boost profitable.


To find any interruption in performance, once Crabsticks Plc observed its debt capacity will get signal the amount can lend and the amount can generate from its sources. There are some factors which Brunswick's should follow in order to rich its objective in dealing with debt to equity ratio such as rating agency benchmark. At the moment Brunswick's can choose its own financing options to exercise such as real estate investments.


To choose and deriver the sharing in fixed and variable in considering the rate of debt, Brunswick should choose one of them. This mix will exist on the availability some factors such as bond ratings and bond insurance, and ways to amend the interest rates.


To maintain stead of variable rate and to avoid any kind of risk which can happen, because this normally come with risk attached such as credit and performance risk. So Brunswick's should reduce this risk to minimal level as result boost performance, create shareholder and lower the Crabsticks Plc overall cost of capital.


To use swaps as alternative to manage the cost of capital, If Brunswick's capital structure raise rapidly, factor for Brunswick Plc to adapt derivative strategies such as interest rate swaps. This will provide sustainable and capital structure. This allows comparisons of asset and liability for the future marketing point of view. Brunswick should considering by acting quickly to change any comparison which may affect capital structure.


To consider longest maturity debt structure level, Brunswick's overall debt has huge interested on the present and future prospectively on the basis of cash generated and level of debt. The minimal cash generated in future it indicate the way longest to be sustainable on capital market.


Control and amend debt portfolio, to make sustainable and highest performance minimal possible charge, and considerable amount of risk, essential thing to deal with Brunswick's should focus further in planning target to boot its economics by effective applying and adapt these steps . by doing so Brunswick's would have strong plan to create massive market, customers, make interested to investors and other stake holder to come to invest as well economic sound for expand its investment.


It is likely that the choice of capital structure can directly affect cash flows and shareholder wealth, but too high a level of gearing will increase risk. The impact on cash flows and corporate value of the capital structure decision is far less than the impact of capital investment decisions.

Earnings per share (pence).

Earnings per share used in this assignment is from the statutory annual report for the continuing operation, therefore, it is more comparable and accurate to reflect the performance of Brunswick Plc. From 2004 - 2008 EPS increase by average gross rate 11.78% (W1), even 2007, there are slightly decrease. However, in 2008, the EPS decreased significantly by 35.95% (W2), this decreasing reflects the current difficulty in Brunswick Plc and its increases profitability due to decrease expenses, such as interest payable.

Dividend per share

DPS from 2004-2008 keeps growth trend with inconsistent growth rate, the range from the highest rate13.8% in 2005-2006 to the lowest one 9.8% in 2004-2005 (W3).it is reflect the situations of Brunswick in 2008: decreased profitability and dividend payment ability.

Payout ratio

Payout ratio is ratio of dividend per share to the earnings per share, company need cash to enable them to pay dividend. And cash is generated from profit of the business. The dividend decision base on two stages. First is business has made sufficient profit? Second has that profit generated cash which is not needed for reinvestment in fixed or current assets? So the payout ratio help to answer the first of these questions, it show number of time the dividend has covered by the profit of this year (Weitzman 2005). On view of Brunswick payout ratio 2007 and 2008 are higher payout ratio, the safer' is the dividend. Higher payout ratio means that the Brunswick plc is keeping new wealth to itself, perhaps to be used to buy new assets, rather than dividing it among the shareholder.

In 2004-2005, the dividend policy is constant dividend payout ratio by which growing the dividend follow the rate of earning growth.

After 2006, it seems there is no relation between the dividend growth rate and earnings growth rate. The dividend keeps increasing even the earnings fall. This situation indicates the dividend policy has been changed to a variant on stable dividend policy which is often referred to as a 'ratchet' pattern of dividend. Otherwise, unstable dividend payout ratio may be cause by using adjusted EPS value which is different from the one in the statutory audited financial statement to calculate the dividend by the Brunswick plc management. Generally speaking, the dividend policy of Brunswick is growing dividend with inconstant growing rate.


Payout ratio = Total dividend paid to ordinary shareholders x 100

Earnings after tax and preference dividends

EPS growth rate = (EPST2 EPST1) / EPST1

Dividend Policy that Brunswick plc has pursued;

Constant dividend payout ratio policy

The policy of a constant payout ratio has some problem is that tremendous fluctuations in dividend per share may bring with the fluctuating of earning per share. Illustrated by the Brunswick, in 2008 the dividend payment will fall to 4.7 if the constant payout ratio 35.6% in 2004 and 2005 is used. Therefore, this policy is seldom used listed companies because it may lead to unsatisfactory of shareholders who prefer the dividend growth and it may bring negative signal to the stock market for the future growth of the company.

Steadily dividend growth policy

Many firms may work towards a long-term target payout percentage smoothing out the peaks and through each year. This point is demonstrated by the policy of Brunswick after 2006 in 2006, the dividend payment slightly increase even the earnings decrease slightly in 2007. The dividends still slightly increase in spite of the huge fall of the earnings. This policy may help building the shareholders confidence for the stability of the company. However, it also may cost the company much when there is a profitability or liquidity difficulty.

High payout ratio

In 2007 and 2008, the dividend payout ratio is very high. Except the reason of the steadily growth policy, there are many some other reasons. First, in 2007, the increasing of earning may add the confidence to the management and consequently lead to strong forecast of the future growth, second, the huge discontinuing operation return may give Brunswick excess cash fund which currently lack investment opportunity. The last, due to recent profit fall of the continuing operation in 2007 and excess cash fund from selling discontinuing operation, Brunswick is easy become a takeover target. Therefore, the high dividend payout ratio may be a weapon increasing the share value of the company to defend the takeover or increasing the amount of bid offer to maximize the shareholder wealth.

Factor that influence Director of UK Companies when deciding

Upon their Companies' Dividend Policies are;


Academics have developed many theoretical models describing the factors that Directors should consider when making dividend policy decisions. By dividend policy, we mean the payout policy that managers follow in deciding the size and pattern of cash distributions to shareholders over time. In a seminal paper, Miller and Modigliani (M&M) (1961) argue that given perfect capital markets, the dividend decision does not affect firm value and is, therefore, irrelevant. Most financial practitioners and many academics greeted this conclusion with surprise because the conventional wisdom at the time suggested that a properly managed dividend policy had a significantly positive impact on share prices and shareholder wealth.

Since the M&M study, other academics have relaxed the assumptions of perfect capital markets and offered theories about how dividends affect firm value and how managers should make dividend policy decisions. Over time, the number of factors identified in the literature as being important to consider in making dividend decisions increased substantially. In fact, it became so large that Ang (1987, p.55) wrote, in the current situation there no enough details relating dividend distribution to stake holders. Unfortunately, some of these may not be very good reasons, i.e., not consistent with rational behavior."

My Assignment is to identify the most important factors used by U.K. companies in making dividend policy decisions. Also compare how Directors say they make dividend decisions to how the academic literature says they should make such decisions. Consistent with Lintner's (1956) study of dividend policy, I will look that the amount at present and forecast income as well past dividends are the most important factors influencing the dividend decisions of UK companies. The empirical work of DeAngelo, DeAngelo, and Skinner (1992), Benartzi, Michaely, and Thaler (2003), and others, support Lintner's conclusions. Prior studies by Baker, Farrelly, and Edelman (1985), Farrelly, Baker, and Edelman (1986), Pruitt and Gitman (1991), and Baker and Powell (2000),

Academic Literature

Academics have proposed many different theories about criteria which make interest policy to adapt. Some theories involve taxes, agency costs, asymmetric information (signaling) and behavioral explanations. Meanwhile, other academics have developed and empirically tested different models proposed to explain dividend behavior. Still others have surveyed corporate managers to learn what factors they consider in determining the firm's dividend. Because of the vast amount of published literature about corporate dividend policy, I limit my discussion to a few behavioral models and surveys of corporate dividend policy.

Lintner (1956) conducted a classic study on how managers make dividend decisions. He was the first to ask corporate managers about their perception of dividends and dividend policy. After identifying some variables that have a beating on dividend decisions, he conducted by careful face to face to all who deal with decisions of well-established industrial companies. He concluded that the most important determinant of the size of a company's dividend is a change in company earnings that results in a payout ratio that is "out of line" with the firm's target payout ratio. He explained that firms tend to make periodic partial adjustments in the payout ratio in the direction of the target payout ratio, rather than making dramatic changes in the cash dividend paid. Managers do this because they know what stakeholder more likely want kind of dividend to a fluctuating dividend. Thus, managers smooth dividend payment streams not in long term in order to escape amendments.

Lintner developed a compact mathematical model to describe the dividend decision process. When he tested his propositions, he found that his partial-adjustment model explained of the dividend changes year to year. Based on additional tests, he found that the model worked over longer periods, not just for the period he used to develop the model. Other researchers have developed different models of dividend policy.)

Brittain (1964, 1966) and Fama and Babiak (1968) reevaluated Lintner's model. Their results supported Lintner's view that managers prefer paying a stable dividend and are reluctant to increase dividends to a level that the firm cannot sustain. Fama and Babiak found that changes in a firm's per share dividend are largely a function of the firm's target dividend payout ratio, current or lagged earnings, and the last period's dividend. They concluded that Lintner's basic model performed well relative to alternative specifications. In a recent comprehensive study, Benartzi, Michaely, and Thaler (1997) founded that Lintner's model still existing well explanation on the outstanding dividend occurring procedures.

Others have questioned the efficacy of mathematical models in explaining the dividend policies of individual firms. For example, Bond and Mougoue (1991) conducted empirical tests to see if the target dividend payout rates and the speed of adjustment implied in Lintner's (1956) behavioral model accurately characterized firms' dividend policies. They concluded that the partial-adjustment model does not reflect the unique dividend policies of individual firms. In their review of the evolution of corporate dividend policy, Frankfurter and Wood (1997) observed that firm dividend-payment patterns are a cultural phenomenon. They finalized as dividend policy never be changed and remain the same in both. Thus, Frankfurter and Wood advised researchers to study dividend policies more carefully as a cultural phenomenon rather than expending efforts in mathematical model building.

Instead of building models or developing theories about dividend policy, some academics have attempted to study this "cultural phenomenon" by surveying corporate managers. Several studies attempted to identify factors that financial Directors s consider being most important in determining their firm's dividend policies. In 1983, Baker, Farrelly, and Edelman (1985) and Farrelly, Baker, and Edelman (1986) surveyed 318 New York Stock Exchange firms that have what they describe as "normal" dividend polices. Based on their analysis of responses from manufacturing, wholesale/retail, and utility firms, they concluded that the major determinants of dividend payments are the anticipated level of future earnings and the pattern of past dividends. Most of this are similar to what observed by Lintner (1956). Their results also revealed that managers believe that dividend policy affects share value and that managers are highly concerned with dividend continuity. In addition, their findings suggest that managers of utility companies view the dividend decision somewhat differently than manufacturing and wholesale/retail firms.

A later study by Baker and Farrelly (1988) reported similar results for what they call dividend achievers (companies having unbroken records of at least ten consecutive years of dividend increases). Farrelly and Baker (1989) conducted a survey of institutional investors to learn what these investors consider important in a firm's dividend policy. Their findings show that these sophisticated investors believe dividend policy affects stock prices and dividend consistency is highly important. These results are also consistent with Lintner (1956).

Pruitt and Gitman (1991) describe the interplay among the investment, financing, and dividend decisions in their firms. The results suggest that the following factors are important influences on the amount of dividends paid: current and past years' profits, the year-to-year variability of earnings, the growth rate of earnings, and prior years' dividends. These finding are consistent with Lintner's (1956) behavioral model and the survey work of Baker, Farrelly, and Edelman (1985), Farrelly, Baker, and Edelman (1986), and Baker and Powell (2000). Taken together, these findings suggest that firms attempt to maintain consistency in the level of their firms' dividends. In addition, Pruitt and Gitman found that managers make dividend decisions independently of the firm's investment and financing decisions. Baker and Powell (2000) conclude from their 1998 survey of NYSE-listed firms that little change occurred in dividend determinants between 1983 and 1998. That is, the factors described by Lintner (1956) still explain dividend behavior. Baker and Powell also observed that some industry-based differences in dividend determination declined between 1993 and 1998.

Before to look important factors in determining dividend policy decision, first I will look factors that are likely to influence the company's dividend policy;

  1. Dividend is to be discouraged as they may lead to issue costs associated with raising additional external finance.
  2. Corporate growth. The faster company is growing the lower the dividend payment is likely to be.
  3. Liquidity. Cash is needed to pay dividend. The level of corporate liquidity might influence dividend payouts.
  4. The volatility of corporate cash flows. Companies may be reluctant to increase dividends unless they believe that future cash flows will be large enough to sustain the increased dividend payment.
  5. Legal restrictions. For example, government constraint, limitations on payments from reserves, and covenants on debt that restrict dividends
  6. The rate of inflation. Many shareholders like dividends to increase by at least as much as inflation.
  7. The desires and tax position of the shareholders clientele. However, most companies have a board spread of shareholders with different needs and tax positions.

Importance of factors in determining dividend policy decision is;

The most highly ranked factor when making dividend decisions is the pattern of past dividends. Despite the findings of Dobson, Tawarangkoon, and Dufrene (2003) that financial markets do not price dividend consistency, financial managers appear to believe otherwise. The fact that respondents consider the pattern of past dividends as so important suggests that past dividend decisions may constrain current dividend decisions. This finding helps to explain why firms have historically been reluctant to change dividends from period to period. This reluctance to change dividends, which results in "sticky dividends," is rooted in the firm's concern about its ability to maintain higher dividends in future periods and in the negative market view of dividend decreases. The importance of this factor for Directors s of UK-listed firms is consistent with the findings of earlier studies conducted by Baker, Farrelly, and Edleman (1985), Farrelly, Baker, and Edleman (2004), and Baker and Powell (2000). The results also are consistent with Pruitt and Gitman (1991).

The second highest rated factor is stability of earnings. The high ranking of this factor suggests that managers recognize the importance of keeping the size of the cash dividend from decreasing in the future. The greater the volatility of earnings, the greater the likelihood that a firm will experience a decline in earnings, which could result in a forced decrease in the cash dividend paid. Therefore, firms with more volatile earnings are likely to pay lower dividends, other things being equal. A clear relationship exists between this factor and the first factor. Also, the high level of importance assigned to the stability of earnings is consistent, which states in part, that expected future earnings is an important factor in determining dividend policy. The importance of this factor is consistent with the high ranking of "stability of cash flows" in the Baker and Powell (2000) study.

The third and fourth most highly rated factors is amount at present and future income, respectively. Lintner (1956) identified these two factors, along with the pattern of past dividends, as the most important factors to consider in making dividend decisions. Firms with high (low) earnings tend to pay high (low) dividends. Low dividends may also result when a firm needs to reinvest a large proportion of its profits back into the firm to support rapid growth. In addition, when a firm expects its future earnings to be high, the firm is more likely to increase its cash dividend because of the low probability of having to cut the dividend in the future. The high rankings of these two factors are consistent with the findings of Baker, Farrelly, and Edleman (1985), Farrelly, Baker, and Edleman (1986), and Baker and Powell (2000). The findings also are consistent with Pruitt and Gitman (1991). Therefore, the four factors are of similar importance, despite their different rankings. However, the importance that respondents attached to each factor differs significantly from the most highly ranked factor.

The relatively high ranking of factor (concern about affecting the stock price) suggests that Directors make the dividend decision with a view toward maintaining or increasing the firm's stock price. While the literature continues to debate the importance of dividend policy on stock price, the responses of Directors of UK firms shows that these Director's believe dividend policy does affect stock price. In comparison, Directors of UK-listed firms ranked this factor third in the study by Baker and Powell (2000) and fourth in the study by Baker, Farrelly, and Edelman (1985) and Farrelly, Baker, and Edelman (2004).

The ranking of factor (concern about maintaining a target capital structure) as the sixth most highly ranked factors suggests that responding managers recognize that a firm's dividend policy affects the firm's capital structure. The more earnings a firm retains, the greater will be the equity component of the capital structure (other things unchanged). However, if a firm pays a large dividend (relative to earnings), needed financing may have to come from debt sources. If so, increasing debt without a proportionate increase in retained earnings (or other source of equity) could result in a substantial deviation from the firm's target capital structure. Financial managers of UK-listed firms ranked this factor tenth in the Baker and Powell (2000) study and eighth in the Baker, Farrelly, and Edelman (1985) and Farrelly, Baker, and Edelman (2003) studies.

The importance of factor (desire to maintain a given dividend payout ratio) suggests that some organization control its payout plan in effectively in order to maintain that ratio.

Factor (concern that a dividend change may provide a false signal to investors) ranks as the eighth most highly ranked factor. The ranking suggests that some of the responding managers believe that the financial markets view dividend policy as a source of valuable information. The finance literature suggests that unexpected changes in dividends can produce a signal or announcement effect on the firm's stock price. Many studies have looked for evidence of an announcement effect related to dividends. Most of these studies conclude that the stock market views unexpected (e.g., Woolridge, 1983; Asquith and Mullins, 1983; Benesh, Keown, and Pinkerton, 1984; Ghosh and Woolridge, 1988; Healy and Palepu, 1988; Bajaj and Vijh, 1990; Michaely, Thaler, and Womack, 1995; Impson, 1997). My finding suggests that Directors should consider the potential signals they may be sending when making dividend decisions.


My conducting on this is to identify the most important factors used by U.K. companies that influence Directors of UK in making dividend policy decisions. The most important determinants of dividend decisions appear to be the pattern of past dividends, stability of earnings, and the level of current and expected future earnings. In general, the same factors that are most important to UK-listed firms are also important other firms in the world, My finding is that many Directors are still making dividend decisions consistent as reference to Lintner's (1956).

This conclusion does not imply that the same factors that influence dividend decisions are equally important to all firms. In fact, I identified statistically significant differences in the importance that Directors of financial versus non-financial firms. Three of these factors (stability of earnings, and the level of current and expected future earnings) are among the most important factors influencing dividend policy decisions. Because various market frictions or imperfections may affect firms in different ways, no universal set of factors is likely to be applicable to all firms. That is, the optimal dividend policy for some firms may be unique. Nonetheless, my view is, when coupled with other empirical studies and, strongly suggests that certain factors emerge as being consistently important over time.

My view also suggests that Directors should pay careful attention to their choice of a dividend policy for their firm. The Directors should set an explicit target payout ratio. The interest in having a properly managed dividend policy apparently stems from the concern about affecting the stock price. Because the dividend decision can affect firm value and, in turn, the wealth of shareholders, dividend policy is worthy of serious management attention.

Suggested Action Plan to Directors of UK on Dividend Policy

Forecast the "surplus'' cash flow resulting from the subtraction of the cash needed for investment projects from that generated by the firm's operation over the medium to long term. Pay a maintainable regular dividend based on this forecast. This may be biased on the conservative side to allow for uncertainty about future cash flow. If cash flows are greater than projected for a particular year, keep the maintainable regular dividend fairly constant (hopefully with stable growth), but pay special dividend or initiate a share repurchase programme. If the change in cash flow is permanent, gradually shift the maintainable regular dividend while providing as much information to investors as possible about the reasons for the change in policy.


  1. Ang, J. S., 1987. Do Dividends Matter? A Review of Corporate Dividend Theories and Evidence. Monograph Series in Finance and Economics
  2. Bajaj, Mukesh and Anand Vijh, 1990. Dividend Clienteles and the Information Content of Dividend Changes, Journal of Financial Economics 26:2 (August), 193-219.
  3. Baker, H. Kent. 1988. Relationship between Industry Classification and Dividend Policy, Southern Business Review 14:1 (Spring), 1-8.
  4. Baker, H. Kent and Gall E. Farrelly, 1988. Dividend Achievers: A Behavioral Look, Akron Business and Economic Review 19:1 (Spring), 79-92.
  5. Baker, H. Kent, Gall E. Farrelly, and Richard B. Edelman, 1985. A Survey of Management Views on Dividend Policy, Financial Management 14:3 (Autumn), 78-84.
  6. Baker, H. Kent and Gary E. Powell, 2000. Factors Influencing Dividend Policy Decisions, Financial Practice and Education Forthcoming in Spring/Summer issue.
  7. Bond, Michael T. and Mbodja Mougoue, 1991. Corporate Dividend Policy and the Partial Adjustment Model. Journal of Economics and Business 43:2 (May), 165-178.
  8. Brittain, John A., 1966. Corporate Dividend Policy. (The Brookings Institution, Washington, D.C.)
  9. Bhattacharya, S. 'Imperfect Information, Dividend Policy and the Bird in the Hand' Fallacy', Bell Journal of Economics (spring 1979)
  10. Brennan, M. 'Taxes, Market Valuation and Corporate Finance Policy' National Tax Journal (December 1970)
  11. Elliot B. And Elliot J. (2008) Financial Accounting Report,12th edition.
  12. Elton, E.J. and Gruber, M.J. (1970) 'Marginal stockholder tax rates and the clientele effect', review of Economics and statistic, February, pp. 68-74
  13. Fama, E. Fisher, L. Jensen, M. And Roll, R., 'The adjustment of Stock Prices to new Information', International Economic Review (February 1969)
  14. Fama, Eugene F. and Harvey Babiak, 1968. Dividend Policy: An Empirical Analysis, Journal of the American Statistical Association 63:324 (December), 1132-1161.
  15. Farrelly, Gail E., H. Kent Baker, and Richard B. Edelman, 2003. Corporate Dividends: Views of the Policymakers, Akron Business and Economic Review 17:4 (Winter), 62-74.
  16. Farrelly, Gaff E. and H. Kent Baker, 1989. Corporate Dividends: Views of Institutional Investors, Akron Business and Economic Review 20:2 (summer), 89-100.
  17. Frankfurter, George M. and Bob G. Wood, Jr. 1997. The Evolution of Corporate Dividend Policy, Journal of Financial Education 23:1 (spring), 16-32.
  18. Gordon, M.J. (1963) 'Optimal investment and financing policy', Journal of Finance, May. A refutation of the MM dividend irrelevancy theory based on the early resolution of uncertainty idea.
  20. Impson, Michael, 1997. Market Reaction to Dividend-Decrease Announcements: Public Utilities vs. Unregulated Industrial Firms, Journal of Financial Research 20:3 (Fall), 407-422.
  21. Kaplan 2008/09 (ACCA), Advance Financial Management
  22. Lease Ronald C; Kose John; Avner Kalay; Uri Loewenstein; and Oded H Sarig (2000). Dividend Policy: Its Impact on Firm Value, Boston, Harvard Business School Press.
  23. Lumby S. And Jones C. (2003). Corporate Finance, Theory and Practice, 7th edition
  24. M C. Stewart (1984). The Journal of Finance. Vol xxxix, No. 3. July
  25. Miller, M and Scholes, M. 'Dividends and Taxes' Journal of Financial Economy (December 1978)
  26. Miller, Merton and Franco Modigliani, 1961. Dividend Policy, Growth, and the Valuation of Shares, Journal of Business 34:4 (October), 411-433.
  27. Morgan, I. S. 'Dividend and Stock Price Behaviours in Canada', Journal of Business Administration
  28. Pruitt, Stephen W. and Lawrence J. Gitman, 1991. The Interactions between the Investment, Financing, and Dividend Decisions of Major U.S. Firms, Financial Review 26:3 (August), 409-430.
  29. Randal Woolridge. J. 'Stock Dividends as Signals', Journal of Financial research (Spring 1983)
  30. Ross, S.A. 'The Determination of Financial Structures: The Incentive Signalling Approach' Bell Journal of Economic (1977)
  31. Rozeff, Michael, 1982. Growth, Beta and Agency Costs as Determinants of Dividend Payout Ratios, Journal of Financial Research 5:3 (fall), 249-258.
  32. Rozeff, M. 'Growth, Beta and Agency Costs as Determinants of Dividend Payout Ratios', Working Paper No.81-11, University of Iowa (June 1981)
  33. Sutton T. (2004). Corporate Financial Accounting and Report, 2nd edition
  34. Weitzman P. (2003). Financial & Management Accounting, 3rd edition

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!