What is dividend decision explain any 5 factors which affect dividend decision?

(i) Stability of dividend (ii) Shareholders’preference. (iii) Legal constraints (iv) Access to capital market. Explain the following as factors affecting dividend decision. (i) Stability of earnings (ii) Growth opportunities. (iii) Cash Flow position (iv) Taxation policy.

What are the factors affecting dividend decisions explain in brief?

Factors affecting the dividend decision: Amount of Earnings: Amount of dividend paid by a company depends on the company’s current and past earnings. A company with high earning is in a better position to pay dividends and vice versa.

What are the factors that influence dividend policies of a company?

Steady and Stable Dividend Policy and Others.

• Factor # 1. Maintenance of Reserves:
• Factor # 2. Existence of Earned Surplus:
• Factor # 3. Cash Needs of a Company:
• Factor # 4. Need for Growth and Expansion:
• Factor # 5. Steady and Stable Dividend Policy:
• Factor # 6. Government Taxation Policy:
• Factor # 7.
• Factor # 8.

How does dividend decision make what are the aspects of dividend decisions?

Dividend decision determines the division of earnings between payments to shareholders and retained earnings. The dividend decision, which consider the amount of funds retained by the company and the amounts to be distributed to the shareholders, is closely linked to both investment and financing decisions.

What is a dividend decision?

Definition: The Dividend Decision is one of the crucial decisions made by the finance manager relating to the payouts to the shareholders. The payout is the proportion of Earning Per Share given to the shareholders in the form of dividends. Investment, Financing and Dividend while computing the payouts.

What factors affect dividends?

The following are the some major factors which influence the dividend policy of the firm.

• Legal requirements. There is no legal compulsion on the part of a company to distribute dividend.
• Firm’s liquidity position.
• Repayment need.
• Expected rate of return.
• Stability of earning.

What are the factors which affect the dividend decision of a company?

Who makes decisions about a company’s dividend policies?

The board of directors. Every public company is required to install a board of directors. of a company decides how much of a dividend to give out and how to time the redistribution of profits. One of the most important decisions made by the shareholders in the company is the dividend policy they need to follow.

How do dividend decisions get to shareholders?

The dividend policy decision is a trade-off between retaining earnings v/s paying out cash dividends. While determining a firm’s dividend policy, management must find a balance between current income for stockholders (dividends) and future growth of the company (retained earnings).

How are dividend decisions made to shareholders?

Dividend decision determines the division of earnings between payments to shareholders and retained earnings. The Dividend Decision, in Corporate finance, is a decision made by the directors of a company about the amount and timing of any cash payments made to the company’s stockholders.

What are the factors that affect a company’s dividend decision?

Dividend decision of a company deals with what portion of the profits is to be distributed as dividends between the shareholders and what portion is to be kept as retained earnings. The following are the factors that affect the dividend decision. 1. Amount of Earning :- A firm pays dividends out of its current and the past earnings.

What are the factors that impact a company’s shareholder policy?

Another factor that impacts the policy is the diversity in the type of shareholders a company has. A different group of shareholders will have different expectations. A retired shareholder will have a different requirement vis-a-vis a wealthy investor.

What are the dividend policy obligations of a company?

In a nutshell, the management of a company is completely free to frame the required dividend policy. There are no obligations to be adhered to. So, the company needs to judiciously weight all the above-mentioned factors and formulate a balanced dividend policy.

How does inflation affect dividend policy?

Inflation must be taken into account when a firm establishes its dividend policy. On the one hand, investors would like to receive larger cash dividends because of inflation.