Why do corporate directors usually declare dividends less than the legal maximum and thereby allow retained earnings to increase as a matter of corporate financial policy?
Dividends and Corporate Financial Policy
Directors usually declare dividends less than the legal maximum and thereby allow retained earnings to increase as a matter of corporate financial policy for several reasons:
1 . Available cash did not increase by as much as the amount of earnings, so paying the maximum legally permitted dividends would require raising more cash.
2 . Restricting dividends in prosperous years may permit continued level or steadily growing
dividend payments in poor years.
3 . The firm may need funds for expansion of working capital or for plant and equipment.
4 . Reducing the amount of borrowings, rather than paying dividends, may seem prudent.
5 . The firm can distribute the funds to shareholders with lower tax burdens for them by
using the cash to repurchase shares.
You might also like to view...
In the IMC planning process, a review of ________ allows the marketing team to identify potential target markets and positioning strategies
A) the communications budget B) the marketing plan C) the firm's communication objectives D) the company's context
Generally, as the price of a product increases, sales for the product will increase.
Answer the following statement true (T) or false (F)
There is evidence that the response to a question is influenced by the directionality of the question
Indicate whether the statement is true or false
Cross-cultural communication ______.
A. is now more important than ever B. is similar to the grapevine C. is not a critical consideration D. focuses on the behavior of two individuals’ communication patterns