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Sainsbury’s valuation analysis using the models of dividend growth and cash flow - Essay Example
Author : alanschmeler
Finance & Accounting
Pages 12 (3012 words)
The purposes of this report are to evaluate Sainsbury’s analysis using the models of dividend growth and cash flow and compare the valuations with the actual market value of the company. This information is taken from the annual report of the Sainsbury grocery retailer. …
This paper purports to evaluate Sainsbury grocery retailers using two valuation models. First valuation model is forecast dividend growth using financial statement information to arrive at the forecast or to adjust and validate a forecast based on historical trend data. A dividend is a payment of part of the company’s profit to shareholders. The Board of directors have agreed to pay its shareholders a final dividend of 10.8 percent per share, which was paid on 15 July 2011 to shareholders on the Register of Members at the close of business. The dividend is covered by the underlying earnings. Dividend will increase only if the shares are high. Sainsbury’s has increased its market share in a crucial economic environment. The grocery has concentrated more on the supermarket sale. Net profit is increasing which means there is higher sale through good sales forecaste without increasing the cost. Second valuation model is forecast free cash flow. Cash flows record the movement of cash into and out of the business. This is a valid method to understand the value of money and it helps to record the cash most efficiently. For this, both operating and investing activity are involved. A cash flow forecast, in order to be useful as a management and control tool, must be based on real data and actual commitment. Historical data on which to support a cash flow forecast will be useful, but must be considered in combination with information from your business strategy and your budget in order to project a reasonable picture of what to expect in terms of future cash flows as you move further. ...
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