Financial Management

Running Head : Financial Management

Financial Management - Kingfisher Plc

Name of Student

Name of Subject Course

Name of Professor

7 July 2008

1 . Introduction

The first part of this will critically evaluate the Financial Management policies and practices of Kingfisher for the five-year period 2004 through 2008 by looking how the company has kept its stock prices attractive to investors in relation to the measurable revenue growth and profitability . This will also look into the liquidity position and solvency position as well as the company 's efficiency in

the management of company resources . The second part will determine whether or not the current share prices of Kingfisher plc represent a fair value ' by conducting stock valuation using the company 's estimate of cost of capital . The first part will include an analysis on the financial ratios of Kingfisher for the years 2004 through 2008 as basis of knowing how the company performed financially and the results of the analysis will used as proofs or in evaluating the company 's financial policies and practices

2 . and 3 . Analysis and Discussion with Conclusion

First Part

2 .1 How has the company 's stocks performed

The best evidence of well performing company is the stock price of the company . Increasing stock price is the evidence of a growing and well performing company since a company will always logically aim to have higher stock price . The stockholders are first and foremost interested in the maximization of their wealth and they desire to have higher stock prices . There is thus a need to compare current prices with their old price and if the former is higher , the same would point to increased wealth after adjustment for inflationary effects . Increasing wealth is the dream of every stockholder since each stockholder has other options with their money other investing with Kingfisher

Using the stock price as basis to evaluate the company 's financial performance , Kingfisher exhibited a continued decline in stock price for one year . See Figure 1 below Figure 1 . Graph of Kingfisher stock for one year

Source : MSN , 2008a

The declining stock price appears to be more disastrous for the company considering that the company appears to have shown only a increase in revenues from 2007 to 2008 after suffering a continued decline in revenues for the years 2004 through 2007 . This means that company has not impressed investors by the increase in its revenues for 2008 in terms of increasing stock prices in the stock market . See Figure 2 below

Figure 2 : Revenues for the last five years , Source MSN , 2008b

2 .2 . How has the company performed financially

Looking at the company financial performance is best attained by understanding its revenue and profitability growth . This portion will therefore analyze the company 's gross margin , operating , and net profit margins on whether they are growing in the normal course of events . This will also look into other measures of profitability like return on assets and return on equity and relate the same with the...