Fundamental Finance - Research Paper Example

Significantly, its financial policy in the funding of its expansion in operational capacity is sound. It has a mix variety of funding sources: (a) from cash from operations, (b) long-term debt instruments, and (c) increase in paid up capital. The growth of revenues and consequently the net income is the result of the company's expansion on its investment on revenue producing assets which are the container vessels and dry-bulk carriers. With 20 vessels, including those under construction in 2006 it had grown to 33 vessels.

The revenues increased by 37% in 2007 over 2006, and net income increase of 40% over the preceding year. Moneywise, the investment on property and equipment on vessels alone was $244,684 million in 2007 against $131,720 million in 2006, or an increase in investment totalling $112,974 million. The company had been financing from the same mix of sources. However, since it was listed in the London Stock Exchange it was able to raise larger amounts of funds. Table below is a summary of the funding source and the changes over the last two years: Prior to its listing the company had been funding its operations mostly from cash generated by operations and to a small extent long-term debt.

However, in recent years Goldenport Holdings, Inc. has availed more on both the sale of its shares and much larger issuance of long-term debt instrument. . However, in recent years Goldenport Holdings, Inc. has availed more on both the sale of its shares and much larger issuance of long-term debt instrument. Below is a table showing the relationship of debt and equity and the gearing ratio: (in US$)In US$20072006Total debt193,001,00093,961,000Total equity 181,442,000 149,528,000 Debt/equity1.06/10.63 /1The company increased its debt in 2007 to further finance the acquisition/construction of vessels.

In 2006 the company had a favourable debt to equity ratio of $.063 debt for every $ of equity. However, in 2007 as a result of additional borrowings the debt to equity ratio or gearing ratio has deteriorated to $1.06 debt to $1 of equity. In a sense, the company went into trading on the equity. The gearing ratio in 2006 was favourable to the firm because it was on that year that it was listed on the Exchange, and has raised funds on this IPO in the amount of $115,465,000. The company has a policy to declare dividends equivalent to 50% of net income during the year, and retained the balance for reinvestment on property and equipment, more particularly its marine fleet of containers and dry-bulk cargo.

However, in 2007 the Board decided to declare dividends equivalent to 52% payout on the its net income for the year. This means a lesser retention of income for reinvestment. DividendsThe company has a policy to declare dividends equivalent to 50% of net income for the year. However, for the year ended 2007 the company declared 52% of the net come, or an increase of 4% over the preceding year. This policy had twin objectives. It improved its dividend image with its current and potential