Thames Water company Case Study Example | Topics and Well Written Essays - 3000 words

Thames Water company - Case Study Example It is also in this light that the shareholders will generate more income from the cash dividends as well as the stock dividends that the company gives them. The shareholders are composed of the stockholders who have invested their hard earned money in the business. The shareholders of the company will generate income in order to stay in operation for a long time. If the company does not make a profit, in other words it generates a loss, then there a possibility that the company will close shop. Therefore if the company will close shop, then the company will have to declare bankruptcy and close shop. The shareholders will be given their dividend income based on the percentage of the number of shares they own divided by the total outstanding shares. The dividends are computed as the total sales or revenue less total costs and expenses generated during the year. If the Sales is more than the expenses and costs, then the numerical amount is called net income. If the total costs and total expenses are more than the total sales or revenue for the year, then the numerical amount is called net loss. The net income is then divided by the number of outstanding shares to get the dividend income per share. This means to say that if the shareholder has more shares of stock of the Thames Water company then this particular shareholder will receive dividend income than the shareholders who invested in lesser number of shares. Likewise, if the company generates a net loss for the year, then the net loss will be divided by the total number of outstanding shares. This means that if the shareholder has more shares of stocks in Thames company, then this specific shareholder will receive more losses from as compared to the shareholder of Thames company who has invested in lesser numbers of shares. Expenses are amounts that include costs of repairing the leakages in the more the one hundred fifty year old pipes covering the South Eastern part of England which is under the water supply responsibility of Thames Water company. Some of the major monetary worries of Thames water which will increases its expenses and thereby decrease the net income resulting to lesser shareholder dividends per share is that Thames Water may be fined for '66m by the London Government regulatory agency OFWAT because it failed to meet its targets for reducing the volume of water lost through leaks. The company had already spend an estimated '150m extra on tackling the problem. The company is legally bound to replace around 230 miles of ageing water mains in London over the next five years in addition to the 770 miles it has already planned. The Thames Water company has to accomplish its leakage plugging for the next two years as well as to double its expenses to plug leaks for the two years after that because the company must not fail to meet their revised targets, or else, the Government agency OFWAT will take some enforcement action. Thames was able to reduce expenses when it did not meet its leakage plugging target since 1999-2000. This could be intentionally done to keep the company on a positive net income position. To add to the company's woes, the company had it lost 894m litres of water a day which has translated into lesser sales revenue and correspondingly lesser net income and finally lesser shareholde