+ 44 20 8144 3706Introduction
M&M is the one of the India MNC that operates in the automobile sector. In the present research study changes that happened in the international financial market and its impact on firm is identified. Sources of finance available to firm and their impact on business and dividend policy types are discussed briefly. Direct relationship between sources of finance and finance cost as well as company profitability is explained in the report. Thereafter, analysis of M&M performance is done by using ratio analysis approach and finally conclusion section is prepared in the report.
Recent developments in the financial market and impact on the company:
In the past couple of years banking practices changed significantly specially after the recession that comes in the year 2008. Earlier, banks have liberal or moderately strict credit disbursement policies. In the economies like USA banks easily give loan to the business firms. Over 2008 crisis business firms failed to pay bank loan on time and due to this reason NPA of the firm keeps on increasing consistently and its value was higher in number. This greatly affects banks and some of them shut down (Ahmed, Coulibaly and Zlate,. 2017). Learning from past experiences now day’s banks make strict rules in respect of allotment of the loan. Firms have to pass multiple parameters and thereafter they get loans from banks. In this regard, banks are also using IT technology and AI based software. By using specific information that is made available by the companies AI based system to determine whether the applicant will be able to pay debt on time or it may be the default in its business. Some of corporation develops such kind of system. One of these companies is ZestFinance whose AI based software to evaluate the financial condition of the company and identify the probability of failure to pay the loan on time (Madura, 2020). By taking inputs from software company decide whether to give loan to the company or not.
Such kind of practices significantly affects Mahindra and Mahindra business because now it becomes difficult for the firm to finance its business operations in easy way. It has to take a bank loan from multiple banks or need to follow consortium finance approach to secure a large amount of debt from the banks (Ahmed, 2016). This directly affects company operations and its revenue growth rate. In future time period it becomes harder for the firm to secure a bank loan because in a current time period due to corrupt some of Indian banks shut down or merge with other banks. This situation will also be seen in the international financial market. Thus, stricter rules are expected to be seen in the future and this will surely make it difficult for Mahindra and Mahindra to obtain a large amount of debt in easy way.
Conclusion:
On the basis of the above discussion, it is concluded that recent changes that comes in the international financial market make it difficult for the firms to obtain loan from banks. Firms must adopt an appropriate capital structure in their business so as to control cost of capital in the business. M&M condition is not good and profitability is low in the business and actions need to be taken to improve performance. Low profit affects liquidity position and to meet the WC requirement firm needs to take more loan from a bank. The efficiency of the firm also declines. Hence, improvement needs to make in supply chain and other business operations.
References:
Books and journals:
Ahmed, A. D. 2016. Integration of financial markets, financial development and growth: Is Africa different?. Journal of International Financial Markets, Institutions and Money. 42. 43-59.
Ahmed, S., Coulibaly, B.. and Zlate, A. 2017. International financial spillovers to emerging market economies: How important are economic fundamentals?. Journal of International Money and Finance. 76. 133-152.
Altman, E. I. and et.al., 2017. Financial distress prediction in an international context: A review and empirical analysis of Altman’s Z‐score model. Journal of International Financial Management & Accounting. 28(2). 131-171.
Feng, M. and et.al., 2015. Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review. 90(2). 529-557.
Khan, M. M. 2015. Sources of finance available for SME sector in Pakistan. International Letters of Social and Humanistic Sciences. 47. 184-194.
Lecy, J. D.. and Searing, E. A. 2015. Anatomy of the nonprofit starvation cycle: An analysis of falling overhead ratios in the nonprofit sector. Nonprofit and Voluntary Sector Quarterly. 44(3). 539-563.
Liang, D. and et.al., 2016. Financial ratios and corporate governance indicators in bankruptcy prediction: A comprehensive study. European Journal of Operational Research. 252(2). 561-572.
Madura, J. 2020. International financial management. Cengage Learning.
Mardani, A. and et.al., 2017. A comprehensive review of data envelopment analysis (DEA) approach in energy efficiency. Renewable and Sustainable Energy Reviews. 70. 1298-1322.
Minnis, M.. and Sutherland, A. 2017. Financial statements as monitoring mechanisms: Evidence from small commercial loans. Journal of Accounting Research. 55(1). 197-233.
Robinson, T. R., and et.al., 2015. International financial statement analysis. John Wiley & Sons.
Online
Dividend policy types., 2020. [Online]. Available through:< https://www.wallstreetmojo.com/dividend-policy-types/>.
Mahindra and Mahindra Ltd., 2020. [Online]. Available through:< https://www.bseindia.com/stock-share-price/mahindra–mahindra-ltd/mm/500520/financials-annual-reports/>.
Samiksha., S., 2020. [Online].Theories of dividend: Walter model, Gordon model and Modigiliani Miller hypothesis. Available through:< http://www.yourarticlelibrary.com/theories/theories-of-dividend-walters-model-gordons-model-and-modigliani-and-millers-hypothesis/29462>.
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