Show Para
Ananta Ltd. is a company dealing in ready-made garments from last many years. Recently the profit of the company have started increasing. The finance manager decided to retain the profit instead of distributing it among shareholders.
© examsnet.com
Question : 17
Total: 19
State any three factors effecting the decision identified in (i) above.
Solution:
Three factors Affecting the Dividend Decisions are as follows.
1. Amount of earnings: As a company pays dividends out of its earnings, it can be said that companies with higher incomes are in a position to pay a higher amount of dividends to its shareholders and companies with lower incomes pay a lower amount of dividends to its shareholders.
2. Stable earnings: A company with smooth and stable earnings is in a position to distribute higher dividends as compared to those that have unstable earnings.
3. Stable dividends: In common, companies try to avoid frequent fluctuations in DPS (dividend per share) and go for increasing (or decreasing) their value only when there is a steady rise (or fall) in the company's earnings.
1. Amount of earnings: As a company pays dividends out of its earnings, it can be said that companies with higher incomes are in a position to pay a higher amount of dividends to its shareholders and companies with lower incomes pay a lower amount of dividends to its shareholders.
2. Stable earnings: A company with smooth and stable earnings is in a position to distribute higher dividends as compared to those that have unstable earnings.
3. Stable dividends: In common, companies try to avoid frequent fluctuations in DPS (dividend per share) and go for increasing (or decreasing) their value only when there is a steady rise (or fall) in the company's earnings.
© examsnet.com
Go to Question: