The treasury management

Category: Investment, Money
Last Updated: 09 Jul 2021
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Table of contents

It ensures that the company has sufficient cash to pay up its bills while at the same time minimizing the cost of temporary borrowing and hence maximizing the returns from holding surplus cash that enables its growth into the future. The activities of the treasury management are to manage the receipts and payment, oversee the borrowing and investment programs and also monitor the cash flow in general so as to ensure that the liabilities of a company are met.

Agency Theory

It is a theory that shows the relationship between a principal (shareholder) and an agent of the principal that is the company’s managers. The theory consists of the costs that are incurred as a result of trying to resolve a conflict that exists between the principals and the agents and the aligning interests of the two groups so they can come into a compromise on what is good or bad for the organization to achieve its goals and objectives. The issues such as remuneration, accounting technique or risk taking are some of the factors that affects the relationship of these two parties in the agency theory.

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In the year 2002 the management of the company it received complains about the directors remuneration packages that were too high as compared to what the shareholders expectations, but later the management of the company agreed to review the remuneration package so as to avoid the conflicts that existed between the management, the investors, the National Association of the Pension Funds and the Association of British Insurers about what was appropriate concerning the remuneration.

The conflict was resolved through introducing tougher performance targets on the share options and also the reduction of the amount of compensation that was paid in the event of loss of office, with payment being limited to the one year’s salary for the employees of the organization. The management of the company also involved the shareholders in their decision-making process and it frequently organized regular meetings between the investors, the management, and all the non-executive directors as well as institutional shareholders so as to avoid conflicts in the company into the future.

Market efficiency The financial markets are said to be efficient when the price of a traded asset changes as the market analyses change. It also involves incorporating new information about the company’s future prospects so as to facilitate its growth and attainment of its goals and objectives in an effective and efficient manner. A market is said to be efficient when it has its price quoted on the market and it reflects the company’s future profitability that is based on all the currently existing information of the company.

The company’s small businesses and their subsidiaries contributed to the company sales and profit growth and they have delivered good economic returns for the company this is due to the fact that they enjoyed market lending positions that were beneficial for the company’s achievement of its goals and objectives. The management of kingfisher company's introduction of new products into the market development of its own brand and the extension of the direct sourcing from the low cost producers contributed to the company’s success and also it lead to increased profits for the company.

Investment Appraisal

It is the process of assessing the potential investment projects of the company so as to check on whether they are viable or whether they can generate returns to the company into the future. The techniques that are used in assessing the viability of the investments are referred to as the payback method, average rate of return, discounted cash flow and the internal rate of return. The management of the company implemented the capital management programs so that it would be used to support the future growth of the company products.

The company invested over $361 million for the expansion of its stores, supply chain and information systems so as to increase its sales volume and hence lead to the company’s growth and in the attainment of its goals and objectives. The company initiated staff training and development programs whose objective was to enlighten the employees on how to increase the sales volume of the company. During the company’s fiscal year of 2004, it was reported that its net debt had decreased from 1926. 4 at the start of the year to $843.

8 million and at the end of the year. The company also received 203.0 million proceeds after selling its businesses that were not generating enough revenue for the company. The company generated over 777. 4 million of net cash that came from the operating of the company as compared to 895. 0 million the previous year this means that the performance of the company had declined significantly. The decline of its performance was attributed to the company’s demerger with Kesa Electrical Plc that leftover $423. 0 million in terms of debts of the company.

Sources of Finance

These are ways in which the firms raise funds in order to enable them run their operations effectively. The sources of finance are divided into internal and external sources of finance. The internal sources of finance refers to the methods of raising working capital and they are usually repaid after a short period of time while the external sources of finance refers to method that is used by the firms to raise a lot of funds to facilitate the companies operations to be carried out in an efficient and effective manner.

The repayment of the external sources takes more than one financial year of a company. The sources of finance of a company are overdraft financing, trade credit, equity finance, business angel financing venture capital, hire purchase and leasing factoring and invoice discounting. According to some industry sources they said that the King fisher company’s share would climb due to the takeover bid and thus it would be in a position to acquire any sources of finance due to its poor performance.

Capital Structure

It refers to the way the companies or the corporations finance its assets through a combination of sources such as equity debt or any other hybrid of securities. It also refers to the composition of the invested capital of a business enterprise and the use of debt and equity to finance the operations of the business. The debt finances comes in form of bond issues or the long term notes payable while equity is classified into common stock, preferred stock or retained earning. The short term debt such as the working capital is also classified as part of the capital structure of a company.

It also refers to the firm’s debt-to-equity ratio that shows whether a company is risk or not or when a company is heavily financed by debt, or has a greater chance of incurring risks as the firm is highly levered. The management of Kingfisher Company reported that the Kesa Ltd business would demerger with it and this resulted to over 400 million debt, but the debt was used to act as the company’s capital structure in the future. The expenses that the company would incur as a result of the dis merger would be transaction expenses, exceptional financing charges that relate to the dis merger and the dis merger tax charges.

Divided Policy

It refers to the policy that is used by the management of companies to decide how much dividends should be paid to the shareholders of the company. The management of the company can be able to determine the number of profits that are generated by a company that should go to the shareholders through establishing a dividend policy that is based on the company’s situation now and in the future, the company’s dividend policy also depends on the company’s investors and potential investor’s preferences.

The management of Kingfisher Ltd company experienced demerger with Kesa ltd company that lead to its declaration of dividends so as to satisfy its shareholders since they had transferred the electrical business to the Kesa Electrical Plc Company and the Kesa Electrical would be in a position to issue new shares to the kingfisher shareholders on a pro-rata basis.

According to the directors of Kingfisher they stated that the demerger would not adversely affect the absolute level of dividends that are paid in respect of the current financial year to the existing kingfisher and Kesa Electrical but the dividends would be reflected on each of the group’s performance throughout the current financial year of the company. The directors of kingfisher confirmed that its dividend policy would be based on the strategy of its investment and growth would be enhanced through ensuring its dividends grew progressively throughout the financial year of the company.

The directors said that it would pay interior dividends for the first six months as of August 2008. Risk management The management of the company carries out a formal review of its risk at least every year at the company’s board meeting and the specific risks that are identified are reviewed on a monthly basis to avoid their occurrence in the future. The group frequently develops appropriate key performance indictors so as to better monitor the past and the future performance of each operating unit of the company.

The risks that the company faces are liquidity risk that arises from the financial liabilities that fail due in one year or less, but the company has no material un-drawn committed borrowing facilities. The foreign currency risk result from the companies exposure to transactions that are related to cost that are dominated by currencies in currencies such as sterling, interest rate risk refers to the cash balances that attract a floating rate of interest although the company doesn’t have any borrowings. The current share price of Kingfisher plc and whether it represents a fair value

The share price refers to the price that an investor pays for each single share of any underlying security. It cannot be used as a measure of valuation the underlying company because the number of shares that are outstanding for a company varies from each publicly traded company that exists in the countries in the world. The King fisher company acquired some of the European companies such as the Castorama, But and Wegert that enabled it grow so as to become the largest general retail group in the United States of America.

The management of the company tried to acquire the Asda Company one of United States supermarket chains that was taken over by Walmart, due to the conflict over the acquisitions of Castorama the share prices rose and also the demerger with Kesa Company also led to the rising of the share prices of the company. The latest kingfisher share price was 114. 9 as at 20/6/2008 11. 43 Am Tr. Time The share prices of Kingfisher plc Ltd Company are evaluated on the basis of the cost of estimated number of shares that are reserved under the company’s plans.

The maximum numbers of shares that are granted under a proposed plan or amendment are granted on the basis of the shareholders plans. The share award schemes are subjected to flow-rate restriction that limit the number of shares that should be issued and they are expressed as the percentage of the ordinary share capital of a company over a specified period of time. The share pool of the company is estimated on the basis of the projected shares that are outstanding over company’s plans that are based on the three-year average historic growth rates.

The flow rate restrictions are used to determine the maximum number of share that may be issued under all the plans of a company. For example, the flow rate limits are 10% over 10 years and of this limit 5% is applied to the 10 year discretionally schemes; the limits are also applied to the new shares. The plan cost of the share prices is measured by the Shareholders Value Transfer (SVT) that is the monetary cost that is applied to the company participant who exercises awards at the fixed prices that are below the current market prices.

The Share Value Transfer (SVT) are calculated using the binomial model that states that the estimated monetary value of each award is determined by the factoring of the number of shares that are reserved, the exercise price, award term, vesting parameter and the performance criteria. The factors that are used in determining the cost of performance criteria of a company are the performance variable that is chosen on the basis of the length of performance period, the possibility of retesting the performance variables and the probability that the performance hurdle will be met based largely on the company’s own past performance.

The returns of the company that represent the past performance of a company cannot be used to predict the future returns of the company since the share prices and the returns of a company fluctuate widely as the company continues with its operations. When the investor’s shares are redeemed they could be worth more or less than their original costs. The basis earnings per share are calculated by dividing the earnings that are attributed to the ordinary shareholders weighted average number of ordinary shares that are issued during the year for the diluted earnings per share.

The fair value refers to the amount for which the financial instrument could be exchanged in at arm’s length between the parties that are willing to purchase the financial instrument and those that are informed about the existence of the instruments other than in a forced or a liquidation of the sale. The listed instruments are shown at their market price and the fair values of the other financial instruments are calculated on the basis of discounting the cash flow at the market rates. The short term financial instruments of the company are assumed to have a fair value that is equal to their book value.

The cost of the employer share schemes takes the form of the right to share schemes takes the form of the rights to shares that are recognized over the period of the employee’s related performance. The management of the company does not issue the share options at prices that are below the market price. The company believes that the share ownership by the executive directors and the key staffs they strengthen the link that exists between the personal interests of the staff and those of the shareholders the company thus operates both an approved and an unapproved share option scheme that have been approved by the options.

The Kingfisher plc Company recorded good performance as December 2005, but in the year 2006 the performance of the company declined due the company demerger with the Kesa Electrical plc Company but after its continued operations and merger with some of its subsidiaries its performance started to improve. The total revenue, total profit after and capital employed of the company increased even after the demerger, but the total assets declined.


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  5. website accessed on July 1, 2008 KingFisher plc(KGF:London Stock Exchange) LAST 114. 90 GBXCHANGE TODAY -1. 60 -1. 37%VOLUME 25. 1M KGF On Other Exchanges As of 4:35 PM 06/20/08 All times are local (Market data by Reuters is delayed by at least 15 minutes). http://64. 233. 169. 104/search?
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The treasury management. (2018, Sep 18). Retrieved from

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