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. ...Show more
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. …
The most important aspect of investment hovers around finding a suitable economy, the most appropriate industry type, and a specific company to invest in. After completing this, in order to make the right decision, valuation models must be used to come up with a correct recommendation of buying, selling, or holding the shares of the chosen companies.
Cash Flow (Free) gives far clear picture about the company for it takes into account the change in working capital as well as all investments made during the period. It can be expressed as under. Cash Flow = Net Profit+ Depreciation/Amortization-Expenditures-changes in working cap.
The Dividend Discount Models mainly predict the dividends, and net present value of a common stock. According to this method, the value of a dividend is the sum of all future dividends. Three types of discount models predict future dividends or value of a stock as outlined below.
It argues that the value of a share is worth the actual present value in terms of all the future dividends that a company will pay. This model is the most effective method for valuation because it places the values of shares on the real cash flows that the investors receive.
It is used for the basis of business planning and budgeting. Below is the overall professional comparison of the five companies that were selected for the project. The overall comparison is for the three activities, however, it focuses more on the operating activities
Microsoft serves over 100 countries globally.
Its main purpose is developing and selling their variety of products to consumers. Their products are always up to date; it’s involved in making products such as computer PC, operating systems and
15 pages (3750 words)Essay
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