Financial Managerial Principles Essay Example | Topics and Well Written Essays - 500 words - 1

Financial Managerial Principles - Essay Example It shows how P&G has been performing above than the average S&P 500 index over past years and benefiting its shareholders with higher than the average index returns. The graph assumes that a $100 amount was invested, one in P&G and other in S&P 500 index. It can easily be seen that except for 3 years (1999, 2000 and 2001) during the period, P&G return has been above average which shows the soundness of its financial and operational performance which has enabled it to transfer the benefits to its shareholders in the form of valuable returns. With lowering debt to Asset ratio and increasing current ratio, the company is directed towards lowering its risk perceived by shareholders while at the same time improving its ability to pay off its operational liabilities accrued due to revenue expenditure. Net earnings are also on the rise showing that more and more part of their income will be given to shareholders. Since the dividend payout ration is something around 40 percent it means that with rising net income the shareholders’ cut will also increase. Company’s research and development expenditure are at the ever highest, showing that the company is expected to increase customer satisfaction by offering them innovative and unique solutions to their day to day needs in the form of better and improved products. This will increase customer loyalty and brand preference among customers which will result in increase in company’s value which is a primary concern for a shareholder. The last five year annual growth rate is 10.63 % (Procter & Gamble, 2007) which is good news for investors who relies on dividend payment as a source of their earnings such as retirees. Since these are the type of investors who cannot wait to realize capital gains. They use dividends from the stock investment as a source of earnings. Opportunities are