Financial Analysis of Cadbury Schweppes Essay

The bang-up structure of Cadbury Schweppes based on its 2006 match sheet shows that the companion uses more debt than honor to finance its ope dimensionns. The guilds debt to total stockholders equity proportionality of the union is more than fifty percent, charm its debt to equity ratio is at 1. 30. A high debt to equity ratio pisseds that the troupe relies heavily in debt financing. A high debt to equity ratio does non necessarily mean that the fellowship has poor pecuniary leverage because there are industries that are capital intensive which requires companies to feel large amounts of debt to finance its operations.One such industry is the automobile industry, where a debt to equity ratio of two is still considered accept competent. In the case of Cadbury Schweppes, the fellowship is engaged in manufacturing candy, chocolate and drinks. It is an industry which is not as capital intensive as the car manufacturing industry so its debt to equity ratio maybe too high. T he company has been undergoing changes in its operations over the years. It has in stages moved out of its investments that do not fall within its nitty-gritty business which is confectionery and beverage.While it disposed of some of its incompatible businesses, it act to expand its confectionery and beverage operations. These acquisitions, particularly those made in the unite States can be the reason for its large debt. Debt is used by the company to increase its operations and, as a consequence, increase its profits. The companys performance has been increasingly growing every year, so it is possible that the company has determined that the cost of expending the operations which is in the form of interest group payments is much lower than the benefits incurred in the form of increase in sales.Having a large amount of is extremely detrimental to the company if it is unable to retrieve the cost of the debt this is not the case of Cadbury Schweppes. The dividend turn out ratio measures the amount of income have by each destiny of stock with the cost of such pct. The dividend yield ratio necessarily varies over epoch because the grocery pass judgment of circumstances changes as it is traded. A comparison of dividend yield ratio over time can be used to gauge if the performance of the company is improving, nevertheless this ratio should not be analyzed on its own.It must be analyzed together with different factors such as the market value of the share. A company with a low dividend yield can mean that the companys share is priced highly by the market and does not necessarily mean that the company is unable to make dividend payments. On the other hand, high dividend yield can mean that the companys share has a very low market value and not because it is able to give its shareholders large amounts of dividends. The company has a dividend yield of 2. 30% and it share has a market value ranging from 51. 5 to 51. 6.Based on this figures, it is obvious that its dividend yield is not because of the extremely high or low market value of its share. The price/ gelt ratio of the company, on the other hand, is seen by investors as a gauge of how much the market values the companys share. In this companys case, it has a price earning of 24. 22. This spell is very close to the industrys average. This means that the company is war-ridden with other members of the industry and is generally viewed by the investing community as a good investment.Based on its dividend yield and price/ profits ratio, the company is able to compensate stockholders despite its large debts. This is probably because the earnings of the company is divided by a smaller number of shares than if the company chose to finance its operation by equity rather than debt. The large shareholders of the company are Franklin Resources, Inc. and Legal and General with shares ownership amounting to 4. 01% and 3. 47%.