☰
Financial Management
Explain the following as factors affecting dividend decision:
(i) Stability of earnings;
(ii) Growth opportunities;
(iii) Cash flow position and
(iv) Taxation policy
(i) Stability Earnings: Other things remaining the same, a company having stable earning is in a better position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend.
(ii) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. Thus in growth companies, payment of dividend will be less as compared to non-growth companies.
(iii) Cash Flow Position: The payment of dividend involves outflow of cash. Hence if the company is facing shortage of cash, they will pay less dividend. Hence cash flow position affects dividend payment.
(iv) Taxation Policy: The choice between the payment of dividend and retaining the earnings is affected by the difference in the tax treatment of dividends and capital gains. If tax on dividend is higher, it is better to pay less dividends. If tax on dividend is less, higher dividends may be declared. Dividends are free of tax in the hands of shareholders but, a dividend distribution tax is levied on companies.
Sponsor Area
Explain any six factors affecting the financing decision of a company.
Explain any six factors affecting the dividend decision of a company.
What is meant by Dividend decision? State any four factors affecting the Dividend decision.
What is meant by Financing decision? State any four factors affecting the financing decision.
Explain briefly the factors affecting the investment decision.
Explain, in brief, any five factors that should be taken into consideration while determining the long-term dividend policy.
Or
Explain factors affecting the dividend policy of a company.
“Determining the relative proportion of various types of funds depends upon various factors”. Explain any five such factors.
Or
“Determining the overall cost of capital and the financial risk of the enterprise depends upon various factors”. Explain any five such factors.
Investment decision can be long-term or short-term. Explain long-term investment decision and state any two factors affecting this decision.
Identify the financial decision which determines the amount of profit earned to be distributed and to be retained in the business. Explain any four factors affecting this decision.
Explain, in brief, any three decisions involved in financial management.
Sponsor Area
Sponsor Area