Corporate finance Essay Example | Topics and Well Written Essays - 3000 words - 2

Corporate finance - Essay Example Last, the third objective is to maintain a dividend payout ratio of 40%. The objective is suitable because it helps prevent agency problems and respond to the investors’ preference to certain earnings (dividends). The cash flow analysis indicates a strong financial position of the company. In addition, the financial plan takes into consideration the shareholders’ interest of wealth maximizing through payment of high dividends. Food for life, a company incorporated in the United Kingdom, operates locally. The company was established 25 years ago and since its establishment, it has been providing services to various customers such as schools, colleges, hospitals, businesses and retirement homes. The company faces strong competition from only one company, the Organic Foods. Its rival company is a much larger and has expanded into various international markets. The establishment of Food-For-Life was made by two young women who currently own 75% of shares, whereas, the other 25% of shares are owned by a venture capital firm. The end of the financial year 2014 is on the horizon and the customary board meeting is expected any time. Among the most critical issues to be discussed during the board meeting are the company’s objectives. The following are the three objectives to be reviewed during the meeting: first, the company wishes to maintain the company’s profit margin of around 24%. Second, the company seeks to uphold the current strong financial position. Last, in order to satisfy the interest of the shareholders, the company is planning to maintain the current dividend payout ratio of 40%. In addition, the company anticipates an increase in the sales levels to  £ 270 million in 2015,  £ 310 million in 2016 and  £ 350 million in 2017. However, the sales growth rate is expected to be zero for the subsequent years. Based on the company’s financial objectives and other