Evaluate Unilever’s financial strategy Table of Contents Executive Summary 3 Introduction 4 Corporate Life Cycle 4 Sources of fund 6 Modigliani-Miller theorem 8 Dividend Policy 11 Dividend Policy of Unilever 12 Lintners’s Four Stylised Facts 13 Recommendations 14 Reference List 16 Executive Summary In today’s complex and competitive business environment financial strategy applied by the organizations play a major role…
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Then the sources of Finance is analysed using Modigliani-Miller Theorem and it reveals that the debt to equity position of the organization is good and has significant impact on its market value. However, the cash position of the company is not stable and requires attention from the management. The Dividend policy of the organization is healthy and looks at wealth maximization of the shareholders. The managers are concerned about the dividend return and regularly review the dividend policies. Moreover, the economic condition is quite unstable and a sluggish growth is expected. In this regards it is recommended that the organization should give attention towards their cash position and should enhance other activities through which their profitability can be enhanced. The organization is also suggested to maintain healthy debt equity ratio, having higher debt may negatively impact their firm value. Introduction The Unilever Group started their operations in 1885 but was not established until 1930 when the business actually joined forces to create the well established business prior to the start of 20th century. The corporate vision of the organization aims towards helping the people in order to look and feel good and get more out of their life. The organization aims to create a sustainable living place and a better future through their services and brands (Unilever, 2013a). The first priority for the organization is their consumers and then comes the employees, communities and the suppliers. The organization aims to fulfil their responsibilities by serving their customers and make their shareholders eventually rewarded. Financial strategy plays a major role in the sustainability of an organization. Financial strategy is a portfolio that includes corporate strategic plans that involves financing decision and optimum investment that helps in attaining the specified objectives. It is an area of managerial policies that determines the financial and investment decisions, which in turn leads to the wealth maximization of the shareholders (Hill, 2009). This paper focuses on the financial strategy of the organization and provides recommendation on the basis of that. Corporate Life Cycle The Corporate life cycle can be segregated into four stages through which an organization passes. The four stages are introduction, growth, matured and decline. The introduction stage is the point where the organization first places its product and services in the market for the customers. In this stage it starts capturing the market share. The next stage is the growth stage in which the organization with the best quality product or service is at the top of the competition. The sales increases and the organization spend money in building the brand. The demands of the consumers are at the highest point. The third stage is maturity where the organization has maximised their profit and is operating at a stable place in the market. Here the organization decides whether to withdraw their product or services from the market or to bring some innovation in them such that they remain in the market. The main focus is on the sustainability of the business. The last stage is the decline stage. At this stage the organization has already introduced their new products or next generation product. The
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