Evaluate Sainsbury plc's financial strategy

Evaluate Sainsbury plc
Masters
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Finance & Accounting
Pages 8 (2008 words)
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Name…………………………………………………………………….xxxxx Institution……………………………………………………………….xxxx Professor…………………………………………………………………xxxxx Course…………………………………………………………………….xxxx @2012 Evaluate Sainsbury plc’s financial strategy Introduction The core focus of financial strategies is on the financial aspects of strategic decisions…

Introduction

Being the crown of United Kingdom grocer retail stores, there has been a lot of endless speculation on its financial performance. In spite of these speculations, it has risen to be the leader for the last two decades. Sainsbury has relied heavily on equity capital to finance its operations in the recent past. The management consists of the contributors of the needed capital. Being a company based in United Kingdom, where a company with more than 50% of its capital is considered highly geared, the management made a move in the year 2006 to incorporate high level gearing for the following reasons: It acknowledges the tax benefits associated with gearing in that tax is deductible; hence it does not pay tax on the borrowed finance. The shareholders of Sainsbury, who are the providers of equity finance, are not willing to accommodate new members thus debt finance was there ultimate option. Debt finance played a vital role in enhancing their operations in the year 2007 which was characterized by economic hardships globally. ...
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