Planning, Leading And Controlling in Management

Planning, Leading And Controlling in Management In the era of modernisation these days, it appears that the purpose of managers in every single organisation is becoming so essential that we are required to understand the real concept behind management as well as the actual tasks performed by a manager. An understanding of the nature of management is vital for all members of society because all of us will at home stage to be a manager, and an understanding of the concept will enable us to become more effective in that role. Throughout the development of management, there are classical theories of management and modern management theory. Henri Fayol and Henry Mintzberg are both key figures in the management theories today and they are also both internationally renowned academic and authors on business and management with many articles and many books written. Henri Fayol (1841 1925) a French management theorist and managing director of a French mining company, is frequently seen as an essential early contributor to classical school of management theoies or more particularly, administrative management. He believed that management is an acquired skill and can therefore be taught. He wanted to introduce a set of principles that all organisations can apply in order to run properly. He built his theory of the five management functions upon personal observation and experience whilst he was working with French mining organisations, to find what worked well in terms of organisation. This theory was introduced in 1916. These functions serve the purpose of predicting the future of the environment and planning a relevant business strategy, developing a social and technical structure to the organisation, managing the activities of the staff, integrating plans and activities across the organisation and ensuring conformity with the plan via authority and feedback mechanisms to correct inappropriate activity but as he wrote his works in French it was not until some time afterwards that his management functions were recognised worldwide. The five functions were planning, organizing, commanding, coordinating and controlling. Planning This is the first tool of the four functions in the management process. The difference between a successful and unsuccessful manager lies within the planning procedure. Planning is the logical thinking through goals and making the decision as to what needs to be accomplished in order to reach the organizations objectives. Managers use this process to plan for the future, like a blueprint to foresee problems, decide on the actions to evade difficult issues and to beat the competition. Planning is the first step in management and is essential as it facilitates control, valuable in decision making and in the avoidance of business ruin. Organizing In order to reach the objective outlined in the planning process, structuring the work of the organization is a vital concern. Organization is a matter of appointing individuals to assignments or responsibilities that blend together to develop one purpose, to accomplish the goals. These goals will be reached in accordance with the companys values and procedures. A manager must know their subordinates and what they are capable of in order to organize the most valuable resources a company has, its employees. (Bateman, Snell, 2007). This is achieved through management staffing the work division, setting up the training for the employees, acquiring resources, and organizing the work group into a productive team. The manager must then go over the plans with the team, break the assignments into units that one person can complete, link related jobs together in an understandable well-organized style and appoint the jobs to individuals. (Allen, G., 1998). Leading Organizational success is determined by the quality of leadership that is exhibited. A leader can be a manager, but a manager is not necessarily a leader, says Gemmy Allen (1998). Leadership is the power of persuasion of one person over others to inspire actions towards achieving the goals of the company. Those in the leadership role must be able to influence/motivate workers to an elevated goal and direct themselves to the duties or responsibilities assigned during the planning process. (Allen, G., 1998). Leadership involves the interpersonal characteristic of a managers position that includes communication and close contact with team members. (Bateman, Snell, 2007). Controlling The process that guarantees plans are being implemented properly is the controlling process. Henri Fayol stated that Controlling is the final link in the functional chain of management activities and brings the functions of management cycle full circle. This allows for the performance standard within the group to be set and communicated. Control allows for ease of delegating tasks to team members and as managers may be held accountable for the performance of subordinates, they may be wise to extend timely feedback of employee accomplishments. Henry Mintzberg was born September in Montreal, September 2, 1939. He was an internationally renowned academic and author on business and management. He is married to Sasha Sadilova and has two children from a previous marriage, Susie and Lisa. Henry Mintzberg is an internationally renowned academic and author who write prolifically on the topics of management and business strategy, with more than 150 articles and fifteen books to his name. He came up with the roles of management, which he believes cover most of the things a manager will encounter in their job. The reality of management is that the pressures of the job drive the manager to take on too much work, encourage interruption, respond to every stimulus, seek the tangible and avoid the abstract, make decisions in small increments. Mintzbergs key contribution was to highlight the importance of understanding CEOs time management and tasks in order to be able to improve their work and develop their skills appropriately. ÂÂ  these normative systems. Mintzberg does not assume ex-ante what an (in)effective or (non)successful manager entails. He also neglects the relationship between managerial behaviour and organisational effectiveness. Furthermore, he takes a neutral position on the managerial role omitting influences such as ownership and power. Identified contingency factors explain differences in the make-up of managerial work.The empirical study is based on five organisations in action. The small sample size means that the results should not be applied to all industry, organisations or management positions. In his 1973 study, Mintzberg declared that the managers position is always the starting point in organisational analysis. He also argued that managerial roles are sequential a manager first makes interpersonal contact through his formal status which in turn allows information processing and leads to decision making. Mintzberg later rejected this relationship based on new empirical data. The term management roles refers to specific categories of managerial behaviour, and Mintzberg concluded that what managers do, can be described by studying ten different and interrelated roles, grouped around interpersonal relationships, transfer of information, and last, but not least, decision making. Interpersonal Roles The ones that, like the name suggests, involve people and other ceremonial duties. Leader Responsible for staffing, training, and associated duties. Figurehead The symbolic head of the organization. Liaison Maintains the communication between all contacts and informers that compose the organizational network. Informational Roles Related to collecting, receiving, and disseminating information. Monitor Personally seek and receive information, to be able to understand the organization. Disseminator Transmits all import information received from outsiders to the members of the organization. Spokesperson On the contrary to the above role, here the manager transmits the organizations plans, policies and actions to outsiders. Decisional Roles Roles that revolve around making choices. Entrepreneur Seeks opportunities. Basically they search for change, respond to it, and exploit it. Negotiator Represents the organization at major negotiations. Resource Allocator Makes or approves all significant decisions related to the allocation of resources. Disturbance Handler Responsible for corrective action when the organization faces disturbances. Comparison Fayol identifies five elements of management- planning, organising, co-ordinating, commanding and controlling all of which he believed were necessary to facilitate the management process. In comparison Mintzberg considers management activities to fall within three broad groups- interpersonal, informational and decisional which encompass his ten management roles of figurehead, leader, liaison, spokesperson, disseminator, monitor, resource allocator, entrepreneur, disturbance handler and negotiator. Although due to their differences, these theories can be treated as competing views, both can also be perceived as reinforcing the other as many parallels and similarities intrinsically exist. Consequentially the term managerial style combines the two theories. Mintzberg obtained his theory as a result of research based on observation. Hence, his roles directly depict what managers do. He argues that Fayols functions do not describe the actual work of managers at all; they describe certain vague objectives of managerial work (Mintzberg 1971). As he observed the managers in his research, he found that all activities captured at lease one of his ten roles in practice whereas they could not be simplified to be known singularly as one of Fayols functions. For example, a manager sending a memo out to subordinates informing them of the outcome of the mornings meeting is directly taking on the informational role of disseminator- providing internal personnel with information obtained either external or internal of the organisation.

Pre Activity Health Screening and Customer Care

Explain the reason why pre-activity health screening is necessary Pre activity health screening is used to highlight health problems that may be aggravated by physical exercise. A fitness instructor can then assess and prescribe the correct fitness plan for the individual. Screening takes place in the form of a questionnaire and physiological measurements. Some health risks looked for by taking part in pre activity health screening are shown by Woolf, May (2006), categorised by risk factor.The first category is known as ‘primary risk factor’s’ which include high cholesterol and high blood pressure. These problems are related to some of highest risks to health such as heart attack when completing exercise . The ‘Secondary risk factor’s’ that may be aggravated by exercise include obesity that is indicated by a body mass index of over thirty kg/m2 and physical inactivity indicated by a failure to reach the minimum fitness standard required. The la st category is ‘non modifiable risks’ that is made up of factors that can not be helped such as age and a family history of heart disease.Someone over the age of fifty is also considered to be a factor in this category. When an individual has completed a health screening questionnaire they may then be asked to take part in further tests in the form of physiological measurements. A persons body mass index may be taken by dividing their weight by height. This can tell a fitness instructor whether the individual is over weight which would need consideration when an exercise plan was produced.An individuals blood pressure may also be taken as a high reading is considered a high risk factor contributing to coronary heart disease. Another test that may be carried out would be the weight to hip ratio which measures distribution of fat around the body. If the person has more weight around the abdomen it is known as ‘apple shaped’ and is related to a higher risk of cardiovascular disease and diabetes. Completing pre activity health screening is becoming increasingly important for the fitness industry as the need for their services becomes more opular. The evidence shown suggests that health screening has the potential to save lives through diagnosing health problems that may be aggravated by certain physical activity, however a different kind of activity may be appropriate. Although health screening questionnaires are good for highlighting health risks the physiological measurements taken after are vital to further help both the instructor and the individual to diagnose health problems. (405) Q2) Discuss and analyse Reshma’s results.Your analysis should identify whether or not the results fall into healthy ranges, and discuss the implications of this with a particular focus on the risk of developing cardiovascular disease. Reshma’s PAR questionnaire showed that she answered ‘no’ all the questions, however she admitte d to smoking ten cigarettes a day which is putting her at risk of serious health problems and is classed as a ‘primary health risk’ leading to coronary heart disease (Woolf May 2006). A number of physiological measurements were then taken. Reshma had a blood pressure which read 140 over 100 millimetres of mercury.Andy Russel explains that the first reading is systolic pressure which is a contracting heart and diastolic pressure is the heart relaxed. The average reading should be between 100 to 140 over 60 to 90 (mmhg) (The Open University 2008). A reading over 130 and 85 provides more risk of coronary heart disease in middle aged people . (Vasan et al 2001). Reshma then had her resting heart rate measured at 90 beats per minute. According to Netfit (2009), the average heart beat of a women of 48 years old should be between 74 and 77 and anything over 84 BPM is thought to be poor.Stress is one cause of a rapid heart beat and regular exercise would lower heart rate consid erably. Reshma has a body mass index of 30. 5 which is calculated by dividing weight and height. Marie Toms explains that healthy people have readings between 19 and 24 and that anything over 30 is classed as obese (The Open University 2008). Reshma is putting herself at a higher risk of coronary heart disease and other risks such as cancer. Regular exercise would help Reshma lower her BMI and make her a lot healthier. Reshma’s waist to hip ratio was a reading of 1. 0.As Sharky and Gaskill (2007) suggest, the safe limit for women is between . 75 and . 8 which shows Reshma is in further danger of health problems which could be reduced by regular exercise. Reshma’s body fat percentage is shown at 33%. This reading is taken in 4 measurements with a calliper from the arm and back. According to Family education (2010), the average body fat percentage for a women of between 20 to 50 years old should be between 17 to 27 %. Reshma is clearly over the safe limits of body fat an d combined with her other measurements is putting herself at serious risk.The evidence shows that Reshma is at higher risk of cardiovascular disease due to her results. Physical activity can reduce these risks and with regular exercise participation, Reshma would be considerably healthier. If Reshma stopped smoking she would decrease her chance of health problems even more. (402) Q3) Outline how physical activity could have a positive effect on Reshma’s health. If Reshma began a fitness plan she would see dramatic improvements to not only her physical health but her mental health too.Improvements to the efficiency of the vascular system and metabolic changes would increase better health both physical and mental health by reducing stress. Sharky and Gaskill (2007), describes the Vascular system as having many tasks in the body which include carrying blood with oxygen, hormones and food to the cells of the body. The system can be made more efficient when a person takes part in physical activity by reducing blood clotting in narrow coronary arteries. This is achieved by the arteries being made larger and educing the risk of blockage due to plaque in the heart therefore reducing the risk of heart disease. A notable change of the system for Reshma would be that of blood pressure being reduced when regular exercise is carried out. Another benefit of physical activity on the system would be that blood volume increases by 10 to 15 percent and in doing this will lower Reshma’s heart rate over time. The metabolic changes to the body when participating in physical activity contribute to many factors in helping Reshma become healthier.Blood lipids including high cholesterol and triglycerides can be a factor of coronary heart disease. Important metabolic changes would be seen with an increase in fat metabolism because exercise burns fat and increases muscle which further helps to reduce fat. The metabolic changes are significant to Reshma as the metabolism of fat would help to lower her body mass index and would further contribute to a lower waist to hip ratio and body fat percentage. Physical activity not only helps physical health but can also improve mental health.Reshma has high blood pressure due to a busy lifestyle. Hendrix and Hughes(1997) states that regular exercise contributes to good health by lowering diastolic blood pressure and reducing stress. Exercise is also thought to be the best form of stress management because it not only reduces the risk of physiological problems but can also reduce anxiety and depression through its relaxing abilities. These factors would lower Reshma’s blood pressure to an acceptable level. When it comes to Reshma taking part in physical activity the benefits to health are endless.A more efficient vascular system and metabolic changes improve physiological factors in the body and improved mental health reduces the stress leading to a lower blood pressure and a better overall lifestyle. (39 9) Task 2 Q 1) What legislation governs health and safety in a sport and fitness facility, and how might these relate to this accident. The main legislation in the sport and fitness sector is the ‘Health and Safety Act Ect 1974’ . This act is known as a Statute Law which means it is provided by parliament and contains a number of acts that relate to all health and safety topics in an industry.The Child Protection at Work in Sport Unit may also be interested in Luke and Fiona’s case. As Heany and Goody (2008) suggest, the Health and Safety Executive governs a lot of the health and safety aspects in the sport and fitness sector through ‘The Health and Safety Act ect 1974’. The act protects the health and safety of people at work but it also provides health and safety for visitors to a facility. An important Factor in the case of Luke and Fiona could be ‘The Management of Health and Safety at Work Regulations 1999’ which states that an empl oyer should carry out a risk assessment including risks to people not in his employment.A court may then ask if an appropriate risk assessment was carried out in preventing such injury happening to Fiona. The Child Protection at Work in Sport Unit, which is part of the ‘National Society for the prevention of cruelty to children’ may show concern because they may ask why Luke took Fiona into the gym in the first place As the sport and fitness sector grows in stature, the ‘Health and Safety Executive’ becomes more important in the guidance it gives in the of running the industry. (252) Task 2 Q2) Discuss whether or not Luke or his 14 year old Fiona would have a case for negligence against the facility.Explain the reason for your answer. Before a verdict of negligence is awarded a court will use the ‘law of tort’ which takes into account many factors. Jane Goody (2008) describes the law of ‘Tort’ as being a French word for a wrong and that the law makes a defendant protect someone from harm and owe a person a duty of care. The court must prove this by showing the defendant owed the person a duty of care, that the duty of care was broken and that the person received injury due to a breach to the duty of care. Negligence is further explored by using other laws such as ‘Occupiers liability’ and the ‘Reasonableness test‘.These are of much importance in the case of Luke and Fiona When it comes to Luke and Fiona the receptionist does not owe a duty of care because although she let Fiona into the premises, she did not let her into the gym. However the Fitness Instructor did owe Fiona a duty of care because he did not ask for any form of identification. In doing this he broke that duty of care and it could be said, he then breached that duty of care when she was injured. Occupiers liability is the law that gives the occupier of a property or land, the responsibility to make sure such land or pro perty is safe for people to enter.The notable law in the case of Luke and Fiona is that of Occupiers law of 1984 which states that land should be safe even for trespassers. (Jane Goody 2008). Fiona was classed as a trespasser as she entered the gym without permission but the owner still had to make it safe for her as a trespasser. However, the law then becomes more important in the case of Luke and Fiona because even though the defendant has a duty of care to make a facility safe for all, the law changes if the claimant is a child who should have been under the care of an adult.The court may then say that Luke was being negligent for taking Fiona into the gym and it was his responsibility to look after her especially as she should not have been there in the first place. The reasonableness test takes into account whether a defendant acted in a reasonable way in the circumstance and also takes into account any different behavior by the defendant or the claimant, the size of the risk a nd whether injury could have been prevented. Special qualifications held by the defendant are also taken into account (Jane Goody 2008)In the case of Luke and Fiona it could be said that the gym instructor was being unreasonable in not asking Fiona for any identification. In other aspects the instructor could have acted in a reasonable way because Fiona fell over and no equipment was involved however the situation would change if Fiona slipped on a wet floor or fell over equipment because it should have been checked and deemed safe by the instructor. The evidence shows that a case of negligence could be successful in many factors but the law of occupiers liability may lead to an unsuccessful claim .The gym instructor broke his duty of care to Fiona by not asking for identification . Occupiers liability shows that although Fiona was trespassing she had a right to safety, however an award may be reduced or lost because Luke was being negligent in taking Fiona to the gym. 566) .Bibliog raphy 1 & 2) Woolf, May (2006), study topic 3: Minimising the health risks of physical activity in E112 Introduction to Sport, Fitness and Management study guide, Milton Keynes, The Open University. 3) The Open University (2008) E112 Introduction to Sport, Fitness and Management DVD, Milton Keynes, The Open University. ) Vasan et al (2001) ‘Hypertension and Stroke’ in Fitness and Health (6th edn) Sharky and Gaskill (2007), Leeds, Human Kinetics. 5) Netfit (2009) ‘Resting Heart Rate’ (online). Available from: Http://netfit. co. uk/fitness/test/resting-heart-rate. htm (accessed 17th January 2010). 6) The Open University (2008) E112 Introduction to Sport, Fitness and Management DVD, Milton Keynes, The Open University. 7) Sharky, B. J. and Gaskill, S. E. (2007) Fitness and Health (6th edn), Leeds, Human Kinetics. 8) Family Education (2009) ‘Fat Percentage Chart’ (online), Available from: Http://life. familyeducation. com/weight/body-image/46748. tm l (Accessed 17th January 2010). 9) Sharky, B. J. and Gaskill, S. E. (2007) Fitness and Health (6th edn), Leeds, Human Kinetics. 10) Hendrix and Hughes (1997) ‘Activity Minimises Stress’ in Sharky and Gaskill (2007) Fitness and Health (6th edn), Leeds, Human Kinetics. 11) Heany and Goody (2008) ‘Physical Activity and Health and Safety’ in E112 Introduction to Sport, Fitness and Management Study Guide, Milton Keynes, The Open University. 12) Goody,M. (2008) Negligence: ‘Legal Frameworks of Health and Safety’ in Oakley, B. and Rhys, M. (eds) The Sport and Fitness Sector: An Introduction, London, Routledge/Milton Keynes, The Open University.

The acquisition of ASDA by Wal-Mart - Free Essay Example

Sample details Pages: 20 Words: 6052 Downloads: 2 Date added: 2017/06/26 Category Business Essay Type Case study Did you like this example? WAL-MART ASDA Glossary Chapter 2 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Change Overview à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 4 Chapter 4 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Financial Performance à ¢Ã¢â€š ¬Ã¢â‚¬Å" Company Liquidity à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦. 6 Chapter 5 Market Reaction to the Change à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.. 12 Chapter 6 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Investor Ratios à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ã ƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦. 14 Chapter 7 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Companies Dividend Policy à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦. 22 Chapter 8 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Companies Capital Structure à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 23 Chapter 9 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Companies Risk Assessment à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 24 Corporate 10 Strategy Evaluation à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 28 Chapter 11 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Conclusion à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 32 Don’t waste time! Our writers will create an original "The acquisition of ASDA by Wal-Mart" essay for you Create order Tables à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 34 Bibliography à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 35 The acquisition of ASDA by Wal-Mart on July 26, 1999 in reality began in 1991 when Archibald John Norman became the Chief Executive of ASDA (Wikipedia, 2005). The company, formed in 1965 by farmers from Yorkshire, fell upon difficult times in the late 1980à ¢Ã¢â€š ¬Ã¢â€ž ¢s and was transformed under the leadership of Mr. Norman as ASDA became the second largest supermarket chain in the United Kingdom. That transformation saw troubled ASDA develop into a savvy customer driven chain whose slogan was à ¢Ã¢â€š ¬Ã…“permanently low prices foreverà ¢Ã¢â€š ¬Ã‚  (Wal -Mart, 2000). This closeness to the Wal-Mart à ¢Ã¢â€š ¬Ã…“Smiley faces everyday low price campaignà ¢Ã¢â€š ¬Ã‚  is not by accident states Allan Leighton, Chief Executive Officer of ASDA (Wal-Mart, 2000). The company began à ¢Ã¢â€š ¬Ã‹Å"borrowingà ¢Ã¢â€š ¬Ã¢â€ž ¢ Wal-Mart marketing staples such as à ¢Ã¢â€š ¬Ã‹Å"rollbacksà ¢Ã¢â€š ¬Ã¢â€ž ¢ and à ¢Ã¢â€š ¬Ã‹Å"volume-producing itemà ¢Ã¢â€š ¬Ã¢â€ž ¢ (Wal-Mart, 2000). Thus, the acquisition of ASDA by Wal-Mart is one of almost identical corporate cultures and market image. Leighton said à ¢Ã¢â€š ¬Ã…“The businesses are so similarà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  they are à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦almost spookyà ¢Ã¢â€š ¬Ã‚  (Wal-Mart, 2000). This synergistic climate fostered the Wal-Mart acquisition of ASDA. Wal-Mart became the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s largest retailer by utilizing the time proven principles of economies of scale as well as detailed attention to employee retention, controlling costs and getting the most fr om every dollar spent, regardless of operating area. Contrary to some opinions Wal-Mart is not close to market saturation in the United States. It presently operates 1,353 discount stores, 1,713 super centers and 85 neighborhood markets generating $191.8 billion from these operations (Wal-Mart, 2005). The preceding does not take into account Samà ¢Ã¢â€š ¬Ã¢â€ž ¢s Clubs (551), and international outlets (1,587). Thus, Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s acquisition of ASDA represents a long term strategy the company has been engaged in since 1991 when it opened its first foreign outlet in Mexico (Rowell, 2003). And the growth provided from foreign expansion has increased the company size to the point where it is over 4 times the size of the second largest retailer, Carrefour, and tops the Fortune 500 List as the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s largest company (CNN Money. 2004). Within the midst of this global expansion the ASDA acquisition by Wal-Mart has been termed by many analysts à ¢Ã¢â€š ¬Ã…â €œÃƒ ¢Ã¢â€š ¬Ã‚ ¦as the template for future global expansionà ¢Ã¢â€š ¬Ã‚  (Wal-Mart, 2000). Such a landmark business event thus serves as the basis for this paper. The field of corporate finance is extensive in terms of the accounting and finance areas it covers, as well as its applications. Be it expansion, plant and equipment financing, or mergers and acquisitions, to name a few, the variables that must considered and examined are vast in order that the acquiring company understand the financial structure, fiscal health, market positioning, competitive practices and corporate culture of the subject company. Market share is the objective of every business and that means growth. A company achieves this end through the application of a number of techniques, preferably in combination: increased sales expanded product line product innovations new product introductions expansion into new markets via: company introduction joint ventures mergers and/or acquisition Todayà ¢Ã¢â€š ¬Ã¢â€ž ¢s business climate requires companies to produce sustained growth in order to satisfy shareholder expectations of value, and this means employing economies of scale in operations to achieve internal savings that maintain price competitiveness, specially in the food retailing sector. The waves of consolidation have pointed to the utilization of mergers and acquisitions as the quickest means to achieve these ends when the conditions favor such. This means a company instantly gains presence in a market with established operations in place. In addition, the acquiring company adds significant assets to its operations as well. Financing such acquisitions means that the acquiring entity have the internal as well as external fiscal resources in place. Financing such activity can take one or all of the following forms: internal cash on hand funds raised by shares and or additional offerings leveraging of assets borrowing issuance of corporate stock The selection of the one, part or all of the preceding, the percentage of each selected area that will be utilized to obtain the required figure and the resultant effects on the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial well being after the acquisition are equations that must be examined and worked through prior to entering into such activity. Such is the nature of corporate finance, the means by which a company utilizes its fiscal resources to obtain the net result of increase market share, economies of scale, stabile operations and profitability. Chapter 2 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Change Overview In examining the conditions to acquire another company, the obvious aspect to be considered and equated is that of changeà ¢Ã¢â€š ¬Ã¢â€ž ¢. Change that will occur: Within the acquiring company as a result of expanded operations in administration, logistics, accounting, legal, regulations, cultural adjustments, marketing, packaging and personnel, In the acquired company in terms of acceptance of being a subsidiary and the resultant corporate culture adaptations, managing personnel, as well as uncertainty over the future and individual positions, Public and shareholder opinions concerning the proposed acquisition and how this will impact upon the corporate images of both companies, Competitive adjustments that will occur from this new threat. The preceding requires that both companies have a thorough understanding of the far reaching ramifications that will accompany such an action and what adjustments, preparations and other measures they will need to undertake both internally as well as in the press, with suppliers and other sources to minimize and any negative connotations. How adequately and thoroughly both companies prepare for and execute the necessary aspects of the preceding broad categories are as important to the actual financial ramifications of the acquisition as they help to set the climate in which these firms will operate in the near future. Areas overlooked can potentially surface to impact negatively and thus affect the projected success of the acquisition in terms of returns, public opinion and market reactions. Chapter 3 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Rational and Expectations In the case of Wal-Mart the rational behind the acquisition of ASDA Group PLC was entrance to a new market to fuel growth, market sh are, achieve economies of scale and drive bottom line results. Said practice had been implemented on the part of the company starting in 1991 when it entered Mexico in a joint venture that eventually became an acquisition. That first foray was a practical learning experience for the company conducted almost within its own back yard. The closeness of the deal enabled Wal-Mart to keep tabs on problems and thus have a logistical as well as managerial advantage in being able to react and respond to the multitude of new developments that would or could surface operating in a foreign environment. The practical foresight in conducting a close at hand foreign market entry minimized the potential for embarrassment resulting from errors, made even moreso by the relative unimportance of the country in and on the world stage. Subsequent entries into Puerto Rico, Canada, and other countries permitted Wal-Mart to gain valuable internal expertise to tackle increasingly competitive markets. The company rationale and expectations concerning this acquisition were stated by Wal-Mart International Division president John Menzer in indicating that Wal-Mart à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ needsà ¢Ã¢â€š ¬Ã‚ ¦.the growth..à ¢Ã¢â€š ¬Ã‚  when in the future à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ the United States (growth), slows downà ¢Ã¢â€š ¬Ã‚  (Rowell, 2003). He added that à ¢Ã¢â€š ¬Ã…“The United Statesà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  represents à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦37 percent of the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s economyà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  therefore leaving à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦63 percent of internationalà ¢Ã¢â€š ¬Ã‚  growth (Rowell, 2003). Clearly, Wal-Mart was and is seeking growth via consolidation. Chapter 4 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Financial Performance à ¢Ã¢â€š ¬Ã¢â‚¬Å" Company Liquidity 4.1 Disclosure Ethics The à ¢Ã¢â€š ¬Ã‹Å"disclosureà ¢Ã¢â€š ¬Ã¢â€ž ¢ policy of public companies must conform to the standards and regulations as set forth by the respective governing bodies overseeing the trading and regulations for the stock market. In the United States this body is the Securities and Exchange Commission that sets forth specific rules requiring public companies à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ to provide complete and comprehensive disclosureà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  (Moulton and Rosen, 1999). In the United Kingdom the Financial Services Authority oversees the regulation of stocks listed on the London Stock Exchange. The disclosure rules are not as strict as those posed by the Securities and Exchange Commission in the United States and they set forth specifics concerning (Financial Services Authority, 2005): transferable securities, units in collective investment undertakings, money-market instruments, financial futures, forward interest-rate agreements, interest-rate, currency and equity swaps; options to acquire or dispose of any instrument falling into these categories, derivatives on commodities; and any other instrument admitted to trading on a regulated market in an EEA State or for which a request for admission to trading on such a market has been made. The way in which the disclosure rules are laid out requires investors to have a strong working knowledge of the intricacies of this area. This loose interpretation has been challenged by Callum McCarthy the chairman of the FSA in a speech delivered on November 5 2004 which called for increased disclosure rules (FSA, 2004). Thus the question of morality with regard to companies supplying investors with scant information is governed by the rules set forth and therefore companies seek to present themselves in the best possible light and reveal what is required. The question as to whether this policy is in the public interest is undergoing review by the European Union. The recent scandals in the United States with respect to the failures and bankruptcies of large U.S. firms has created a new climate on the part of governments to set forth stricter rules and policies to safeguard the public. Financial reports for large corporations take on the name of à ¢Ã¢â€š ¬Ã‹Å"consolidated fina ncialà ¢Ã¢â€š ¬Ã¢â€ž ¢ statements, which is the combination of all subsidiaries and operating companies within the corporation. The merging of this data shields details from any one company and thus protects weak performing units from all but the closest scrutiny. As the consolidated financial statements meet the rules of financial disclosure this practice is not illegal. However, in the case of large companies with multiple divisions and subsidiaries, important information can he lost in the maze of numbers and reporting techniques thus making the average investorà ¢Ã¢â€š ¬Ã¢â€ž ¢s task of understanding what profits and losses are attributable to which division as difficult if not nearly impossible. 4.2 Wal-Mart Post Merger Wal-Mart trades as WAL on the London Stock Exchange at 2,497 p as of 8 October 2005 which is down from its February 2002 high of 4,425 p. The stockà ¢Ã¢â€š ¬Ã¢â€ž ¢s downward spiral since that time has been consistent. As the second largest UK food reta iler it has been losing market share to rival Tesco whose market lead of 10% over ASDA points to their success. Worse still that gap between Wal-Mart / ASDA and Tesco is widening (Wikipedia, 2005). As Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s largest overseas holding, ASDA accounts for approximately half of its international sales which are reported to be over  £15 billion. Interestingly, a good part of the resurgance of J. Sainsbury has come at the expense of ASDA, thus the removal of Tony de Nuzio as the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s Chief Executive Officer by Andy Bond in the early 1990à ¢Ã¢â€š ¬Ã¢â€ž ¢s (Wikipdeia, 2005). The driving force behind ASDAà ¢Ã¢â€š ¬Ã¢â€ž ¢s marketing campaign and image to consumers is as à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ Britainà ¢Ã¢â€š ¬Ã¢â€ž ¢s lowest priced supermarketà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  (Wikipedia, 2005), a claim that Tesco finally has managed to take away from ASDA / Wal-Mart for the first time in seven years (BBC News, 2005). ASDAà ¢Ã¢â€š ¬Ã¢â€ž ¢s marketing is not reaping the results the company is looking for and this has been reflected in the appointment of Sharon Osbourne to replace Julie Walters at the company. Based upon the in-depth information contained herein, as well as the relative positioning and successes of ASDAà ¢Ã¢â€š ¬Ã¢â€ž ¢s rivals, the stock is not recommended for acquisition unless one is seeking a speculative long term hold based on Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s marketing savvy being able to regain market share and make up ground on market leader Tesco over time. 4.3 Competitive Comparisons The competitive market that Wal-Mart entered in its acquisition of ASDA consists of only four major firms in the super center category with a number of smaller operators. In order to more completely understand the dynamics of the merger, an understanding of the food retailing market in the United Kingdom is in order. 4.3.1 Wm Morrison Supermarkets PLC Wm Morrison became a major competitor in the U K supermarket wars via its acquisition of larger rival Safeway PLC in March of 2004 (Hoovers, 2005). That acquisition required Wm Morrison to best Tesco and ASDA in a hotly contested battle and it increased its number of stores from 125 to 550 (Hoovers, 2005). Ranked 4th in terms of turnover size in the United Kingdom food retailing market, the company presently has 360 supermarkets. Its marketing strategy is based upon conducting the basics of the business efficiently utilizing a low price format from large stores. Interestingly, Morrison has sold off the 114 Safeway Compact convenience stores to Somerfield while both Tesco and ASDA are expanding their presence into this market. Morrisonà ¢Ã¢â€š ¬Ã¢â€ž ¢s stock performance over the past five years has fluctuated from 178 p to a high of 250 p and presently trades at 177.75 (Yahoo Finance. 2005). The company recently reported a 14% increase in sales at the converted Safeway stores and has shown steady sales increases since 2000: Table 1 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Wm Morrison Supermarket PLC (Wikipedia, 2005) Year Ended Turnover ( £ millions) Profit Before Tax ( £ millions) Profit After Tax ( £ millions) 30 January 2005 12,116 297.1 205.7 1 February 2004 4,944 319.9 197.6 2 February 2003 4,290 282.2 186.3 3 February 2002 3,915 243.0 143.7 4 February 2001 3,496 219.1 120.0 29 January 2000 2,969 189.2 103.1 The latest analyst recommendations for the company are as follows: Table 2 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Wm Morrison Supermarkets PLC Analyst Rating (Yahoo Finanzen, 2005) Rating Analyst Wm Morrison Supermarkets: Neutral JP Morgan Wm Morrison Supermarkets: Under perform Goldman Sachs Wm Morrison Supermarkets: Equal Weight Lehman Brothers Wm Morrison Supermarkets: Out perform Credit Suisse First Boston 4.3.2 J. Sainsbury Listed on the London Stock Exchange as SBRY, at one time this chain was the largest in the United Kingdom. Today J. Sainsbury is the third largest chain in the UK and it has recovered from losses in market share to stabilize its operations (Wikipedia, 2005). The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s new strategy was based upon overhauling its supply chain to solve the problems of stock availability, price competitiveness and improving customer service. The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial performance since 1998 is as follows: Table 3 à ¢Ã¢â€š ¬Ã¢â‚¬Å" J. Sainburys PLC (Wikipedia, 2005) Year Ended Turnover ( £ millions) Profit Before Tax ( £ millions) Net Profit ( £ millions) Basic Eps (p) 26 March 2005 15,409 15 61 3.5 27 March 2004 17,141 610 396 20.7 29 March 2003 17,079 667 454 23.7 30 March 2002 17,162 571 364 19.1 31 March 2001 17,244 437 276 14.5 1 April 2000 16,271 509 349 18.3 3 April 1999 16,433 888 598 31.4 7 March 1998 14,500 719 487 26.1 Analyst ratings for the company are: Table 4 à ¢Ã¢â€š ¬Ã¢â‚¬Å"J Sainsbury PLC Analyst Ratings (Yahoo Finanzen, 2005) Rating Analyst J. Sainsbury: Underweight Lehman Brothers J. Sainsbury: In-Line Goldman Sachs J. Sainsbury: Under Perform Credit Suisse First Boston J. Sainsbury: Underweight JP Morgan Clearly, analysts are not yet convinced of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s re-structuring efforts and the ratings reflect such. The company numbers 512 stores and has expanded into banking and financial services. It is this diversity that analyst feel caused the company to lose its focus on its core business, food retailing and the resultant crisis. The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s share price has dropped from a high of 450 p in mid 2001 to a low of 220 p on February of 2003 and now trades at 283.50 p. 4.3.3 Tesco Britainà ¢Ã¢â€š ¬Ã¢â€ž ¢s largest retailer in global as well as domestic sales has managed to wrest the title of lowest priced supermarket chain from rival ASDA / Wal-Mart to add to the other successes it has had in the market place. With a 29% share of the market it leads ASDA / Wal-Mart by a full 10%. A survey conducted by The Grocer stated that the average shopping at Tesco came in at  £167.84 which was 0.4% less than for the same items at ASDA / Wal-Mart (B BC News, 2005). Tescoà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial performance since 1998 has been as follows: Table 5 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Tesco PLC (Wikipedia, 2005) Year Ended Turnover ( £ millions) Profit Before Tax ( £ millions) Net Profit ( £ millions) Basic Eps (p) 26 February 2005 33,974 1,962 1,366 17.72 28 February 2004 30,814 1,600 1,100 15.05 22 February 2003 26,337 1,361 946 13.54 23 February 2002 23,653 1,201 830 12.05 24 February 2001 20,988 1,054 767 11.29 26 February 2000 18,796 933 674 10.07 27 February 1999 17,158 842 606 9.14 28 February 1998 16,452 760 532 8.12 The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s loyalty programs, Internet shopping service and customer satisfaction have enabled it to maintain its leadership position. On a global scale, Tesco oversees Internet grocery retail operations for U.S. based Groceryworks in which it has a 35% stake (Wikipedia, 2005). The company also has expanded into mobile and landline telephone services as well as it being an ISP. Tesco is also pursuing expansion through the acquisition of other companies. The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s stock has risen after a drop in February 2002 to its current highs of (Yahoo Finance, 2005) and analystà ¢Ã¢â€š ¬Ã¢â€ž ¢s favor the stock. Table 6 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Tesco PLC Analyst Rating (Yahoo Finanzen, 2005) Rating Analyst Tesco: Reduce Jyske Bank Tesco: Reduce Jyske Bank Tesco: Out Perform Goldman Sachs Tesco: Overweight JP Morgan Tesco: Out Perform Hypo Vereinsbank Tesco: Overweight Morgan Stanley Tesco: Kaufen Helaba Trust Tesco: Overweight JP Morgan Tesco: Overweight JP Morgan Tesco: Upgrade Hypo Vereinsbank Tesco: Kaufen Helaba Trust Tesco: Overweight (Update) JP Morgan Tesco: Overweight JP Morgan Chapter 5 Market Reaction to the Change Wal-Mart has been surprising market analysts since its humble beginnings as a discount warehouse outlet that initially opened stores in rural areas. That foundation of providing its customers with low priced merchandise items across a broad spectrum of product types soon vaulted the company past then U.S. market leader K-Mart. John Menzer, the president of Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s international division states that the company à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ needsà ¢Ã¢â€š ¬Ã‚ ¦.the growth..à ¢Ã¢â€š ¬Ã‚  when in the future à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ the United States (growth), slows downà ¢Ã¢â€š ¬Ã‚  (Rowell, 2003). Menzer goes on to add that à ¢Ã¢â€š ¬Ã…“The United Statesà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  represents à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦37 percent of the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s economyà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  therefore leaving à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦63 percent of internationalà ¢Ã¢â€š ¬Ã‚  growth (Ro well, 2003). The double-digit gains the analysts have become used to from Wal-Mart have become increasing harder for the company to sustain in the U.S. market where it opens a new stores approximately once every 42 hours (Rowell, 2003). The companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s first move abroad in Mexico occurred in 1991, which was followed by Puerto Rico (1991), Canada (994), Argentina and Brazil (1995) continued with Jakarta (1996), China (1996), Germany (1998), South Korea (1998), the United Kingdom (1999), and then Japan (2002) (Rowell, 2003). The phenomenon of Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s foreign expansion has been commented upon by Al Norman on à ¢Ã¢â€š ¬Ã‹Å"CBS 60 Minutesà ¢Ã¢â€š ¬Ã¢â€ž ¢, who stated that the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s expansion into Mexico is a telling script on how it buys into existing operations rather than start from scratch (Rowell, 2003). The soundness of this strategy gives Wal-Mart a distinctive advantage in that by à ¢Ã¢â€š ¬Ã‹Å"buying intoà ¢Ã¢â€š ¬Ã¢â €ž ¢ a foreign market it eliminates a competitor as well as obtaining a functioning operation that is known to consumers, along with trained employees and established outlets. The Wal-Mart concept of large stores with massive inventories forces it to seek locations on the fringe areas of towns. The pull of a Wal-Mart causes people to drive thus taking them out of proximity with the in-town shops. This eventually creates a drawn on their business and to compete, in-town stores have to re-locate to approximate the Wal-Mart locations in order to maintain business. This cycle continues until the areas around super stores now support a variety of other business leaving the in-town shops suffering. Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s entry into the British arena has prompted a price war between it and larger British food retailing rival Tesco. Tescoà ¢Ã¢â€š ¬Ã¢â€ž ¢s real estate positioning in the market is superior to ASDA which Wal-Mart / ASDA is battling by discounting and expanding mercha ndise ranges as well as new store openings (Morning News, 2005). Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s stock price since the merger has dropped approximately 30% as the company pours more cash into market expansion, not just in Britain, but other markets it has entered as well. Chapter 6 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Investor Ratios Varied ratios permit investors, analysts and financial institutions to evaluate public companies against varied proven formulas. Taken as a whole, combinations of these ratios and formulas provide a look inside the maze of financial information by focusing on the key variables and their relationships to each other. 6.1 Ratio Analysis Liquidity ratios measure the financial liquidity position on a specific day, such as when the Balance Sheet is completed. The resulting ratios help to measure the capability of the company to handle its short as well as long term obligations (CreditGuru, 2005): First Liquidity Ratio, Is obtained by dividing à ¢Ã¢â€š ¬Ã‹Å"total current assetsà ¢Ã¢â€š ¬Ã¢â€ž ¢ by à ¢Ã¢â€š ¬Ã‹Å"total current liabilities. The resulting ratio represents the à ¢Ã¢â€š ¬Ã‹Å"working capitalà ¢Ã¢â€š ¬Ã¢â€ž ¢ of the current assets to meet current obligations (CreditGuru, 2005): ASDA 1998 (Compitition Committee, 2003) The ASDA ratio of 2.978 remains fairly constant through 1999, the year of the acquisition, as would be expected since the company was in a normal operations mode, and had not undertaken any unusual or costly expansion, renovation or merger activities during this period. In fact it could very well be said that since the company was aware of the pending acquisition through talks with Wal-Mart, it might have delayed any activity that would have reflected negatively on the sale price out of responsibility to the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s shareholders. ASDA 1999 (Compitition Committee, 2003) The ratio for this year compares favorably with the ratio for 1998 as would seemingly be the case for a company understanding that it is in the midst of a merger. (3.0266) Wal-Mart 1997 (Shibui Markets, 2005) The figures for the à ¢Ã¢â€š ¬Ã‹Å"First Liquidity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ remain fairly consistent for the years leading up to the acquisition. 1.642 represents the à ¢Ã¢â€š ¬Ã‹Å"First Liquidity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for 1997. Wal-Mart 1998 (Shibui Markets, 2005) The à ¢Ã¢â€š ¬Ã‹Å"First Liquidity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for 1998 is 1.33 Wal-Mart 1999 (Shibui Markets, 2005) The à ¢Ã¢â€š ¬Ã‹Å"First Liquidity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for 1999 is 1.26 The ratio does not increase due to the acquisition as a result of adding assets and liabilities that were in proportion from ASDA. Wal-Mart 2000 (Shibui Markets, 2005) The ratio post merger figure shows a decline which indicates that the assets to liabilities benefits and obligations were in Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s favor as reflected by 0.99. Second Liquidity Ratio The à ¢Ã¢â€š ¬Ã…“Quick Ratioà ¢Ã¢â€š ¬Ã‚  is calculated by dividing à ¢Ã¢â€š ¬Ã‹Å"total quick assetsà ¢Ã¢â€š ¬Ã¢â€ž ¢ by à ¢Ã¢â€š ¬Ã‹Å"total current liabilities. Quick Assets are those that can be easily converted to cash if they are not already in that form. It is represented by current assets less inventories (Investopedia, 2005). ASDA 1998 Data not available ASDA 1999 Data not available Wal-Mart 1997 (Wal-Mart, 2000) The à ¢Ã¢â€š ¬Ã‹Å"Quick Assetà ¢Ã¢â€š ¬Ã¢â€ž ¢ figure for 1997 is 0.19. Wal-Mart 1998 (Wal-Mart, 2000) The à ¢Ã¢â€š ¬Ã‹Å"Quick Assetà ¢Ã¢â€š ¬Ã¢â€ž ¢ figure for 1998 is 0.19 Wal-Mart 1999 (Wal-Mart, 2000) The increase in this number is a result of the ASDA acquisition, 0.24. Wal-Mart 2000 (Wal-Mart, 2000) The ratio reduces slightly in conformity with a similar reduction shown by the First Liquidity Ratio for the same years (1999 and 2000), 0.17. Third Liquidity Ratio The Debt to Equity Ratio is calculated by dividing à ¢Ã¢â€š ¬Ã‹Å"Total Liability (Debt)à ¢Ã¢â€š ¬Ã¢â€ž ¢ of a firm by à ¢Ã¢â€š ¬Ã‹Å"Owners Equity (Net Worth)à ¢Ã¢â€š ¬Ã¢â€ž ¢. This ratio permits the measurement of how the firm is managing the leveraging of its debt with respect to the capital being utilized (Investipedia, 2005). The formula provides information to determine that if the liabilities exceed the net worth, which would mean that the creditors have a bigger stake in the enterprise than the shareholders. It is computed by taking the à ¢Ã¢â€š ¬Ã‹Å"Total Liabilitiesà ¢Ã¢â€š ¬Ã¢â€ž ¢ and dividing it by à ¢Ã¢â€š ¬Ã‹Å"Owners Equityà ¢Ã¢â€š ¬Ã¢â€ž ¢ ASDA 1998 Data not available ASDA 1999 Data not available Wal-Mart 1997 (Wal-Mart, 2000) Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s à ¢Ã¢â€š ¬Ã‹Å"Debt to Equity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for 1998 is 0.639. Wal-Mart 1998 (Wal-Mart, 2000) The à ¢Ã¢â€š ¬Ã‹Å"Debt to Equity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for 1998 is 0.782 Wal-Mart 1999 (Wal-Mart, 2000) The à ¢Ã¢â€š ¬Ã‹Å"Debt to Equity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for the year of the merger remains constant, in conformity with the First Liquidity Ratio and à ¢Ã¢â€š ¬Ã‹Å"Quick Asset Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ for these years, 0.793. Wal-Mart 2000 (Wal-Mart, 2000) The à ¢Ã¢â€š ¬Ã‹Å"Debt to Equity Ratioà ¢Ã¢â€š ¬Ã¢â€ž ¢ increase slightly the following year to 0.998. 6.2 Net Income Comparisons to Industry Standards The data for ASDAà ¢Ã¢â€š ¬Ã¢â€ž ¢s net income comparatives could not be found as much of the data is either unavailable or not found in the consolidated financial statements of Wal-Mart. Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s numbers for the period 1997 through 2000 are as follows (Wal-Mart, 2000): 1997 21% 1998 21% 1999 22% 2000 21% The preceding numbers are close to the industry standard of 25.9% as determined by The Co-operative Group (Co-operative Group, 2005), an association of business individuals who formed this organization as a result of their common economic, cultural and social needs. Wal-Martà ¢Ã¢â€š ¬Ã¢â€ž ¢s positioning as a low price retailer puts additional pressure on profits as a result of pricing, thus the preceding figures do not seem out of line with their market positioning both before and after the acquisition of ASDA Group PLC. 6.3 Share Price Comparison with FTSE According to the September 2005 FTSE UK Markets Review (FTSE Research, 2005) Food and Drug Retailers posted a share price performance of à ¢Ã¢â€š ¬Ã¢â‚¬Å"3.9%. The industry grouping takes into account all publicly listed firms within the classification and as a group they represented one of the à ¢Ã¢â€š ¬Ã…“5 Worst Performing Industry Sectors on the FTSE (FTSE Research, 2005). 6.4 Systematic and Unsystematic Risk Analysis 6.4.1 Systematic Risk Analysis A à ¢Ã¢â€š ¬Ã‹Å"systematic riskà ¢Ã¢â€š ¬Ã¢â€ž ¢ influences a broad spectrum of assets and can include the entire market. The other name for this term is à ¢Ã¢â€š ¬Ã…“Market Riskà ¢Ã¢â€š ¬Ã‚  as a result of the aforementioned (Mississippi State University, 2003). Some examples of areas or aspects that can, and do affect the entire market are (Mississippi State University, 2003): Changes in the money supply, Inflation, GDP growth, Changes in tax rates, and War or regional conflicts The sweeping ramifications of the foregoing, as a few select examples, will either immediately or eventually effect almost all of the firms within the market. One important consideration to keep in mind is that these à ¢Ã¢â€š ¬Ã‹Å"systematic risksà ¢Ã¢â€š ¬Ã¢â€ž ¢ can not be eliminated in terms of management measures, portfolio changes or other techniques. One either rides them out, cost averages down or waits until it (the risk) has run its course. The Markowitz Model states that the à ¢Ã¢â€š ¬Ã‹Å"investorà ¢Ã¢â€š ¬Ã¢â€ž ¢s total utilityà ¢Ã¢â€š ¬Ã¢â€ž ¢ is based upon the assumption of an expectation of future wealth and the risk that is expected as a result of this. There are three fundamental results that typify optimum investment (Mississippi State University, 2003): Investors seek and prefer higher returns or lower returns, Investors want to avoid risk or minimize it wherever possible, and that there is a à ¢Ã¢â€š ¬Ã‹Å"diminishing marginal utilityà ¢Ã¢â€š ¬Ã¢â€ž ¢ connected to the attainment of wealth. 6.4.2 Unsystematic Risk Analysis This type of risk affects either an individual firm, or a small quotient of financial assets as well as firms. It is also known as a à ¢Ã¢â€š ¬Ã‹Å"Market Specific Riskà ¢Ã¢â€š ¬Ã¢â€ž ¢ since it affects a specific area or firm. Another aspect of this risk is that it is also termed a à ¢Ã¢â€š ¬Ã‹Å"Diversifiable Riskà ¢Ã¢â€š ¬Ã¢â€ž ¢ in that it can be removed from a portfolio since it is a singular type of occurrence. Since à ¢Ã¢â€š ¬Ã‹Å"unsystematic riskà ¢Ã¢â€š ¬Ã¢â€ž ¢ is random the effect can be eliminated from a portfolio through diversification as this type of risk is usually offset by good events occurring in another firm or firms (Mississippi State University, 2003). 6.5 CAPM (Capital Asset Pricing Model) The Capital Asset Pricing Model was developed by William F. Sharpe whose approach of a à ¢Ã¢â€š ¬Ã‹Å"heretical notionà ¢Ã¢â€š ¬Ã¢â€ž ¢ concerning investment risk as well as reward was the basis for it. Under this model there a re two specific risks (Burton, 1998): The risk of being in the market, which Sharpe titled a systematic risk. This was later called à ¢Ã¢â€š ¬Ã‹Å"betaà ¢Ã¢â€š ¬Ã¢â€ž ¢ and it can not be removed by diversification. The second aspect of risk is the unsystematic risk which can be mitigated through diversification measures. Sharpe calculated that the expected return of a portfolio is based on its à ¢Ã¢â€š ¬Ã‹Å"betaà ¢Ã¢â€š ¬Ã¢â€ž ¢, which is its relationship to the market overall. The Capital Asset Pricing Model aids in measuring portfolio risk and the return on said risk that can be expected for assuming it (Burton, 1998). 6.6 Beta Termed a statistical measurement of volatility regarding a stockà ¢Ã¢â€š ¬Ã¢â€ž ¢s trading price in relationship to the price movement of the market overall, it is a useful theory that the average investor can and does utilize (Carlson, 2003). The following is what beta reveals about a stock (Carlson, 2003): Beta of 1 This indicates that the stock is market neutral, meaning that is neither carries less or more risk than the market overall. The stock will tend to move as the market moves, up or down. Beta that is greater than 1 Stocks falling within this category will either rise or fall faster than the market does. As an example, a stock whose à ¢Ã¢â€š ¬Ã‹Å"betaà ¢Ã¢â€š ¬Ã¢â€ž ¢ is 1.25 is forecast to move 25% more than the market, thus if the market rises by 1%, then the stock is expected to rise by 1.25%. The same is true in a decline. Beta that is under 1 A stock with a à ¢Ã¢â€š ¬Ã‹Å"betaà ¢Ã¢â€š ¬Ã¢â€ž ¢ that is less than 1 is projected to move less than the market does. A à ¢Ã¢â€š ¬Ã‹Å"betaà ¢Ã¢â€š ¬Ã¢â€ž ¢ of 0.8% means the stock is expected to move 0.8 in price when the market moves by 1%. 6.7 WACC Known as the à ¢Ã¢â€š ¬Ã…“Weighted Average Cost of Capitalà ¢Ã¢â€š ¬Ã‚  this theory calculates the expected return to owners of equity and debt the cost of capital. WACC calculates the return that both the lenders and stakeholders can expect. In a discounted cash flow analysis the WACC is utilized as the discount rate that is applied to cash flows in the future to derive the net present value of the business. The WACC is also used as the hurdle rate via which to gauge ROIC performance (McClure, 2003). 6.8 Capital Gearing Ratios Also known as à ¢Ã¢â€š ¬Ã‹Å"leverageà ¢Ã¢â€š ¬Ã¢â€ž ¢, gearing describes the components of long-term corporate funding that is internally provided by shareholders and contributed to exter nally by lenders. Utilizing ratio analysis to interpret financial statements requires more that just calculating key gearing ratios. The ratios are tools that provide a deeper insight of the company to aid in planning and decision making along with control (Anderson, 2000). The higher the degree of leverage within a company the more risky that company is. As is the case with most ratios the average level of ratios within an industry is considered the acceptable norm. Some of the more widely understood examples of gearing ratios are (Anderson, 2000): Debt to Equity Ratio, Times interest earned, Equity Ratio, and Debt Ratio 6.9 Pecking Order Theory Under this theory, funds that are generated internally represent a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s first selection or choice, which is followed by debt and then equity as the third choice (Frank et al, 2000) 6.10 Static Trade Off Theory The à ¢Ã¢â€š ¬Ã‹Å"Static Trade Off Theoryà ¢Ã¢â€š ¬Ã¢â€ž ¢ basically consists of two versions and they both predict that companies have a capital structure that is optimal: The traditional version postulates the capital structure of a firm and is determined as a result of the trade-off in the tax benefits of debt and the costs expected as a result of financial distress. An optimal mix of debt and equity is obtained when à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦the marginal present value of tax savings equals the marginal present value of financial distress costs.à ¢Ã¢â€š ¬Ã‚  (Irvine et al, 2000) The second version, which is termed à ¢Ã¢â€š ¬Ã‹Å"agency theoryà ¢Ã¢â€š ¬Ã¢â€ž ¢, is a trade-off regarding the agency costs associated with an equity and the agency debt costs. An optimal debt-to-equity ratio minimizes the total agency costs. Prior to the merger of ASDA Group PLC and Wal-Mart, ASDA paid out dividends when operational profits permitted. In addition, the employees participated in a share scheme whereby 7% of their paycheck go into the scheme and this is still active after the merger. The start of the fiscal year also marks the period when employees can elect to sell, buy as well as float their shares. The post merger climate has changed this to a small degree in that the ASDA employees are purchasing Wal-Mart shares (Coursework.info, 2005). By providing employees with a vested interest in the company they work for via share ownership, management receives a higher level of commitment and this has helped the company achieve its goals and objectives as set forth in customer service and quality as well as internal baking, sales and other aspects of business. 7.1 Dividend Policy Theory of Modigiliani and Miller In 1961 Modigiliani and Miller argued that the value of a company is independent of that compa nyà ¢Ã¢â€š ¬Ã¢â€ž ¢s dividend policy (Estrada, 1996). The amounts of money that are paid out in dividend policy are in reality quite extensive. Thus the payment of dividends does deplete companies of cash which might be put to better use elsewhere. In those types of situations many firms opt not to pay out dividends in order to keep cash on hand. Thus there does seem to be a correlation, at least in the instances of some firms, whereby dividend policy is either linked or thought of in consideration of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s overall value 7.2 Dividend Policy Theory of Lintner John Lintner (1956) developed this theory by utilizing two observational facts of dividend policy as the basis for correlation: That companies usually set long-run ratios regarding dividends tied to earnings and the amount of NPV projects which are available. NPV is a tool that evaluates investment decisions. Its primary advantage is the time value of money, calculation of uncertainty as well as the risks of the project that are inherent in its implementation (Odellion Research. 2004). And that earnings increases are not always a given, thus the dividend policy is not changed until new earnings levels are achieved and sustained. Of these two differing views Lintnerà ¢Ã¢â€š ¬Ã¢â€ž ¢s model takes a more pragmatic stance in that dividend policy is tied to corporate performance and long term stability rather than the need to pay out dividends for the sake of dividends. 8.1 Modigiliani and Miller The à ¢Ã¢â€š ¬Ã‹Å"Capital Structure Irrelevance Theoremà ¢Ã¢â€š ¬Ã¢â€ž ¢ states that a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦capital structure does not affect firm valueà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  (Hill, 1996). Simply stated, a company can not increase the capital value of the enterprise by utilizing one capital structure in place of another as it is a static item. The assumptions put forth by Modigiliani and Miller are as follows (Hill, 1996): Investment decisions are independent of financing decisions, Financial markets are perfect, Financial markets are complete, and Financial markets provide equal treatment for those seeking financing as well as those who are providing financing. It is the first assumption, combined with the à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ traditional finance principleà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  (Hill, 1996) that represents the value of a company is calculated by the net present value of its anticipated future cash flows. The preceding means that there is only one value that can be assigned to that company and that its capital structure does not represent a value added benefit. Thus, the capital structures of ASDA and Wal-Mart have no relationship or bearing on the terms or outcome of the merger. Chapter 9 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Companies Risk Assessment Edward Altman (1983) in the 1960à ¢Ã¢â€š ¬Ã¢â€ž ¢s used à ¢Ã¢â€š ¬Ã‹Å"Multiple Discriminant Analysis in combination with a set of five financial ratios to result in the à ¢Ã¢â€š ¬Ã‹Å"Altman Z-Scoreà ¢Ã¢â€š ¬Ã¢â€ž ¢. This formula utilizes statistical techniques to predict the probability of failure for a company by eight items from the balance sheet: Earnings Before Interest Taxes (EBIT), Total Assets, Net Sales, Market Value of Equity Total Liabilities Current Assets Current Liabilities Retained Earnings in combination with ratios and the resultant weight factor as shown in the following Table 7: Table 7 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Altman Z-Score (Altman, 1983) Ratio Weightage A EBIT / Total Assets x.33 -4 to +8.0 B. Net Sales / Total Assets X 0.999 -4 to + 8.0 C Market Value of Equity / Total Liabilities X 0.6 -4 to +8.0 D Working Capital / Total Assets X 1.2 -4 to + 8.0 E Retained Earnings / Total Assets X 1.4 -4 to +8.0 The preceding ratios are then multiplied by the weightage factors indicated with the results added as follows (Altman, 1983): Z-Score = A x 3.3 +B x 0.99 + C x 0.6 + D x 1.2 + E x 1.4 The following are the interpretation of these figures (Z-Score) after the application of the preceding (Altman, 1983): Z-Score above 3.0 This indicates that the particular company is à ¢Ã¢â€š ¬Ã‹Å"safeà ¢Ã¢â€š ¬Ã¢â€ž ¢, keeping in mind the figures utilized to compile the result. Z-Score falling between 2.7 and 2.99 A company falling in this category should be noted as being à ¢Ã¢â€š ¬Ã‹Å"on Alertà ¢Ã¢â€š ¬Ã¢â€ž ¢ as this is an area where caution needs to be exercised. Z-Score falling between 1.8 and 2.7 This indicates that there is a high probability that the subject company should go bankrupt in a time frame of two years from the date of the financial figures. Z-Score that is below 1.8 A Z-Score in this range means that the probability is extremely high of the company going bankrupt. The Z-Score was applied to Wal-Mart for the years 1997 through 2000 with the following results. As the financial figures needed to perform this same correlation for ASDA were not available the Z-Score test was not utilized, however it can be safely stated that Wal-Mart analyzed ASDA for the Z-Score and other factors prior to acquisition and in all probability found nothing negative. A fact that is borne out by the successful post merger results: Wal-Mart Z-Score for 1997 The following figures were utilized to obtain the Altman Z-Score: Table 8 Wal-Mart Z-Score for 1997 (Wal-Mart, 2000) Category Financial Figure (In Millions) 1. Earnings Before Interest Taxes (EBIT) 5,695 2. Total Assets 39,604 3. Net Sales 3,056 4. Market Value of Equity 65,895 5. Total Liabilities 20,973 6. Current Assets 17,993 7. Current Liabilities 10,957 8. Retained Earnings 17,143 The resulting Altman Z-Score is 3.26 Wal-Mart Z-Score for 1998 The following figures were utilized to obtain the Altman Z-Score: Table 9 Wal-Mart Z-Score for 1998 (Wal-Mart, 2000) Category Financial Figure (In Millions) 1. Earnings Before Interest Taxes (EBIT) 6,503 2. Total Assets 45,384 3. Net Sales 3,526 4. Market Value of Equity 115,131 5. Total Liabilities 24,134 6. Current Assets 19,352 7. Current Liabilities 14,460 8. Retained Earnings 18,503 The resulting Altman Z-Score is 4.11 Wal-Mart Z-Score for 1999 The following figures were utilized to obtain the Altman Z-Score: Table 10 Wal-Mart Z-Score for 1999 (Wal-Mart, 2000) Category Financial Figure 21,132(In Millions) 1. Earnings Before Interest Taxes (EBIT) 8,120 2. Total Assets 49,996 3. Net Sales 4,430 4. Market Value of Equity 261,000 5. Total Liabilities 26,369 6. Current Assets 21,132 7. Current Liabilities 16,762 8. Retained Earnings 21,112 The resulting Altman Z-Score is 7.26 Wal-Mart Z-Score for 2000 The following figures were utilized to obtain the Altman Z-Score: Table 11 Wal-Mart Z-Score for 2000 (Wal-Mart, 2000) Category Financial Figure (In Millions)

Fathers Day Quotes From Daughters to Dads

Fathers and daughters share a special bond. Reach out to the most special man in your life on Fathers Day  with one of these special messages  about the relationship between fathers and daughters.   Fanny Fern: To  her, the name of father was another name for love. Anne Geddes: Any man can be a father,  but it takes someone special to be a dad. Euripides: To a father growing old, nothing is dearer than a daughter. Margaret Thatcher: I just owe almost everything to my father [and] its passionately interesting for me that the things that I learned in a small town, in a very modest home, are just the things that I believe have won the election. Margaret Truman: Its only when you grow up, and step back from him, or leave him for your own career and your own home—its only then that you can measure his greatness and fully appreciate it. Pride reinforces love. Shakira: I thank God that Im a product of my parents, that they infected me with their intelligence and energy for life, with their thirst for knowledge and their love. Im grateful that I know where I come from. Anne Sexton: It doesnt matter who my father was; it matters who I remember he was. Angelina Jolie: And my dad:  youre a great actor but youre a better father. Gloria Naylor: Old as she was, she still missed her daddy sometimes. Helen Hayes: When Charles first saw our child Mary, he said all the proper things for a new father. He looked upon the poor little red thing and blurted, Shes more beautiful than the Brooklyn Bridge. Enid Bagnold: A father is always making his baby into a little woman. And when she is a woman he turns her back again. Phyllis McGinley: The thing to remember about fathers is, theyre men. A girl has to keep it in mind: They are dragon-seekers, bent on improbable rescues. Scratch any father, you find someone chock-full of qualms and romantic terrors, believing change is a threat - like your first shoes with heels on, like your first bicycle it took such months to get. John Gregory Brown: Theres something like a line of gold thread running through a mans words when he talks to his daughter, and gradually over the years it gets to be long enough for you to pick up in your hands and weave into a cloth that feels like love itself. John Mayer: Fathers, be good to your daughters. You are the God and the weight of her world. Garrison Keillor: The father of a daughter is nothing but a high-class hostage. A father turns a stony face to his sons, berates them, shakes his antlers, paws the ground, snorts, runs them off into the underbrush, but when his daughter puts her arm over his shoulder and says, Daddy, I need to ask you something, he is a pat of butter in a hot frying pan. Stanley T. Banks: You fathers will understand. You have a little girl. She looks up to you. Youre her oracle. Youre her hero. And then the day comes when she gets her first permanent wave and goes to her first real party, and from that day on, youre in a constant state of panic. Anonymous: They say that from the instant he lays eyes on her, a father adores his daughter. Whoever she grows up to be, she is always to him that little girl in pigtails. She makes him feel like Christmas. In exchange, he makes a secret promise not to see the awkwardness of her teenage years, the mistakes she makes or the secrets she keeps. Ashton Kutcher, on being a step-parent: I like being what the girls call MOD—my other Dad. What Ive learned in the past year is that every kid is different. But as long as you love them and never forget that love, then you have the key. I think its all about just being there and loving them because kids feel that every single day. Alice Walker: It no longer bothers me that I may be constantly searching for father figures; by this time, I have found several and dearly enjoyed knowing them  all. Margaret Atwood: All fathers are invisible in  daytime; daytime is ruled by  mothers  and fathers come out at night. Darkness brings home fathers, with their real, unspeakable power. There is more to fathers than meets the eye.