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dividend policy ppt mba

A number of considerations affect the dividend policyof the company. The main factors Hey

1. the stability of income. the nature of the activitieshas an important impact on the dividend policy.Industrial units, with the stability of earnings canformulate a more coherent policy on dividends than those that have an uneven stream of income, because they can easily predict their savings and income. As a rule, enterprises engaged in needs, less affected by the uncertain income than those related to luxury goodsor dry goods.

2. the age of the Corporation. Age Corporationexpects a lot of determination of dividend policy. the newly established company may require a large portion of their income for the expansion andimprovement of the plants, and can take the tough policy of dividend payment, and, on the other hand,older than the company can formulate clearer and more consistent policy regarding dividends.

3. Liquidity funds. The availability of cash and strongfinancial position is also an important factor indeciding dividend. the dividend is a cash outflow, the more funds and liquidity of the company's ability topay dividends. better liquidity of the companydepends on the investment and financial servicesfirms, which in turn determines the rate of expansion and the method of funding. If the cash position is weak, stocks dividends will be distributed, and if the position is good, the company may distribute cash dividend.

4. the degree of sharing. Nature of property also affects the decision of dividends. closely held company is likely to obtain the consent of the shareholders to suspend dividends or to follow conservative dividend policy. On the other hand, a company with a large number of shareholders of common and form a low or medium income group, will face great difficulty in securing such an agreement, because they wouldemphasize distribute high dividends.

5. the need for additional capital. Company to keeppart of their profits to strengthen their financial position. income can be maintained to meet the increased need for working capital and expansion in the future. Small companies tend to have difficulties in raising funds for their needs with increased working capital for expansion. They are, without any other alternative, use their reinvested earnings. Thus, suchcompanies distribute dividends at low prices and keep most of the profits.

6 cycles. Trade. Economic cycles and the impact on thedividend policy. Dividend policy shall be regulated in accordance with business fluctuations. During the boom, good governance creates food for unexpectedthat follow the inflation period. The higher rate ofdividends can be used as a tool for marketing thesecurities otherwise depressed market. Solvency can be proven and supported by companies in the boringyears if adequate reserves were built up.

7. public policy. Earnings power of the company isaffected by the change in the financial, industrial,labor, management, and other measures of public policy. Sometimes the Government limits thedistribution of dividends beyond a certain percentagein a particular industry, or in all areas of business activity, as was done in an emergency situation.dividend policy should be modified or formulated inthese enterprises.

8. taxation Policy. The high level of taxation reduces the profit of it companies and, therefore, the dividendrate is lowered. Sometimes the Government levied atax on dividend distribution dividend beyond a certain limit. This also affects the formation of capital. N India, dividends 10% outside of the paid capital dividendsare taxed at the level of 7.5%.

9. the requirements of the legislation. When deciding on dividends, Director of the legal requirements toointo account. In order to protect the interests of the creditors of the Company Act of outsiders, A.n. 1956prescribes certain guidelines for the allocation andpayment of dividends. In addition, the company is obliged to provide for depreciation on its fixed andtangible assets before declaring dividends on shares.This implies that dividends should not be distributedfrom the public, anyway. In addition, contractual obligations and must be met, for example, the payment of dividends on preferred shares inprecedence over the dividend on ordinary shares.

10. past rate of dividends. In formulating the company's dividend policy, managers should keep in mind the dividends paid in previous years. the currentrate should be around the Middle past of the rat. If he was of abnormally high shares will be subject tospeculation. 

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