With Reference to the Data in Appendix B, Figure 3, Do You Think the Shareholders of Scott Electronics Plc Will Be Pleased with the Company’s Financial Performance in 2011

In: Business and Management

Submitted By reader3000
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2010: Dividend per share = 20p, Dividend yield = 13.3%, Current ratio = 1.6:1
2011: Dividend per share = 40p, Dividend yield = 20%, Current ratio = 2.1:1

The shareholders of Scott Electronics might be pleased because the dividend per share has improved by 20p from 2010 and dividend yield also improved by 7% in a years time. This makes owning the shares more attractive and also it is likely to encourage the existing shareholders to retain their shares. Also, another reason could be the fact that the share price increased by 50p, form 1.50 to 2.00, this would also please shareholders because they can make profit from their shares and it can also attract new investors. Increase in operating profit and reserves will also please the shareholders, the operating profit increased by 2 million and reserves increased by a million. These facts indicate that business is doing well and has improved its performance over the year and also that it has saved money, which can be invested later on, in the long term.

However, there might be possible reasons, which could explain why shareholders would not be pleased. One of the reasons is that the dividend yield is still below the industry average dividend yield, which is 25%. Shareholders might not like the fact that Scott Electronics dividend yield is lover than industry average and might sell their shares. Another reason might be the fact that Scott Electronics sold their head office for 2 million, so their fixed costs are likely to increase because of the expenses of paying rent. Also, the one-off item improved the financial performance of the company, however, it won’t do much good as it was extraordinary use of transaction.

In the end, the shareholders were pleased dependent on what they expected. However, they should be pleased with the improvement in the ratio’s, the share price and increase in profit, but they can be…...

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