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Running head: COMPANYS DIVIDEND POLICIES 1
Dividend Payout Policies
Student’s Name
Institutional Affiliation

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COMPANYS DIVIDEND POLICIES 2
2. Based on the findings the company, at its initial stages of operation, has been successful since
it manages to generate profits and even pay out its initial dividends. The company’s profit/ net
income of $ 3,800, which is 15.5% of investment worth $24,500.
3.
Introduction
Dividends refer to the investors returns on their investment in the company. Companies
around the globe strive to improve on the wealth maximization and the overall growth. To achieve
this, they strive to pay out dividends as a way of communicating their well being in financial
performance to attract a more significant pool of investors. The paper analyses whether the
decision by the Elite Service Company to pay dividends meets the dividend policy rationale.
Based on the analysis of Elite’s financial statements, Elite Service Company is a newly
formed company, which has paid a dividend of $1,400 to its shareholders. The company has a
weak base regarding liquidity, and its earnings are still low.
According to the dividends policy, a newly formed or a growing company have not to pay
out dividends and instead should reinvest to accelerate its growth.However, the company (Elite
service) has decided to pay dividends. On the interpretation, the action by the company to pay
dividends indicates how riskier the company is to the investors since the payment of dividends
affects the liquidity of the firm as well as its overall growth. A company’s decision to pay dividends
is based on the following reasons discussed below.

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Running head: COMPANY’S DIVIDEND POLICIES Dividend Payout Policies Student’s Name Institutional Affiliation 1 COMPANY’S DIVIDEND POLICIES 2 2. Based on the findings the company, at its initial stages of operation, has been successful since it manages to generate profits and even pay out its initial dividends. The company’s profit/ net income of $ 3,800, which is 15.5% of investment worth $24,500. 3. Introduction Dividends refer to the investors’ returns on their investment in the company. Companies around the globe strive to improve on the wealth maximization and the overall growth. To achieve this, they strive to pay out dividends as a way of communicating their well – being in financial performance to attract a more significant pool of investors. The paper analyses whether the decision by the Elite Service Company to pay dividends meets the dividend policy rationale. Based on the analysis of Elite’s financial statements, Elite Service Company is a newly formed company, which has paid a dividend of $1,400 to its shareholders. The company has a weak base regarding liquidity, and its earnings are still low. According to the dividends policy, a newly formed or a growing company have not to pay out dividends and instead should reinvest to accelerate its growth.However, the company (Elite service) has decided to pay dividends. On the interpretation, the action by the company to pay dividends indicates how riskier the company is to the investors since the payme ...
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