Financial Statement Analysis & Security Valuation Essay

Financial Statement Analysis & Security Valuation - Essay Example The Morrison plc relies on the viable, competitive benefits and the corporate picture or image regards for improvement the strategic requirements. The financial analysis will make use of Reformulation, ratio, valuation using AOP and FCF model (including sensitivity and WACC calculation) to help in creating a meaningful summary of information based on financial statement of the company. The exhibited big difference between cost of goods sold (CGS) to sales and selling, general and administrative expense to sales indicates that Morrison Plc classify their costs based on the major expense category differently. The unexpected dividend changes normally results to the signaling effects and wealth-transfer. The transfer of the wealth between the debt holders and the equity holders in the market depends on the unexpected changes in the market; hence, the wealth transfers in the market (Fabozzi & Grant 2000, 87). The signaling effect is the change in the stock prices in the market with the unexpected change in the dividend. The unexpected increase in dividend will normally signal the decrease in the price of the stock in the market. The dividend is a significant determinant of the operation in the market because it determines the future earnings of the managers in the market. The higher dividend implies that the managers are reducing the agency problems between them and th eir shareholders; hence, they will be able to involve the shareholders in the increase of stock price (MacMinn, 2005, p. 20). The dividend policy determines the payment of which the business will pay to its shareholders. It determines whether the business will be paying the fraction of the profit to the shareholders, or they will be keeping the whole profit in the business (Baker & Kolb 2009). The dividend policy determines the image the firm will be able to uphold in the market especially to the investors. The market