Day: February 6, 2022

The validity of the traditional position has been questioned on the ground that the market value of the firm depends upon its net operating income and risk attached to it. The form of financing can neither change the net operating Read More …

Capital of a firm is a mix (or proportion) of a firm permanent long term financing representing by debt, preferred stock and common stock Given that is firm has a certain structure of assets, which offers net operating earnings of Read More …

Bonus shares can be issued only out of free reserves built out of the genuine  share premium collected in cash only Reasons for Issuing Bonus Shares The bonus issue tends to bring the market price per share within a more Read More …

While formulating its dividend policy a firm should bear in mind the following considerations:  Investment decisions have the greatest impact on value creation. External equity is more expensive than internal equity (retained earnings) because issue costs and underpricing. Most promoters Read More …

Conditions relevant for determining the payout ratio are as follows: Funds requirement Liquidity Access to external sources of financing Shareholder preferences Differences in the cost of external equity and retained earnings  Control Taxes

Investor Preference for Dividends- If taxes and transaction costs are ignored, dividend and capital receipts should be perfect substitutes. Yet there appears to be a strong preference for dividends. Why? Explanations are based on the behavioral principles of self-control and Read More …