Answer Every investor expects dividend from his investments.Dividen.pdf
Answer: Every investor expects dividend from his investments.Dividend income helps investors in dealing with their routine expenses. Investors put their money to earn some positive returns and dividend is one of the way of getting returns for investors. So, It is a duty of management to satisfy dividend expectation of investors. If management do not pay dividend then it is known as retention of earnings. Retention earnings has it\'s own pro and cons, which are described as follows: Pros: Retained earnings reduces organization\'s dependence on external borrowings. It can be considered as an advantage when external borrowings are not available easily. Retained earnings indicates good business opportunities, It means organization is growing financially. It may result in better stock valuation of organization. In some situation dividend is subject to taxes (either distribution tax or income tax) in the hands of investors. So, in this case investors are not interested in dividend but they are more interested in capital gain(which may be tax exempt). So, In this situation retained earnings fulfill investor\'s objective. Cons: As explained earlier all the investors have some expectation of dividend, in case of higher retention of earnings it may become difficult to fulfill investor\'s expectations. Retention of earnings may affect investor\'s earning capacity when investors have available opportunities, which gives higher return than organization earns by retaining amount. In this case investor looses earning opportunities. In case of dividend management\'s decision is significantly influenced by media and institutional investors. Media is responsible for organization\'s image in society, such image significantly affects organization\'s financial performance. This is why management always considers media\'s point of view before making any dividend decision. Institutional investors are usually invests their money and takes part in decision making process of organization. Institutional investor\'s weight in decision making process is generally very high, so it is obvious that they influence management\'s dividend decision also. Solution Answer: Every investor expects dividend from his investments.Dividend income helps investors in dealing with their routine expenses. Investors put their money to earn some positive returns and dividend is one of the way of getting returns for investors. So, It is a duty of management to satisfy dividend expectation of investors. If management do not pay dividend then it is known as retention of earnings. Retention earnings has it\'s own pro and cons, which are described as follows: Pros: Retained earnings reduces organization\'s dependence on external borrowings. It can be considered as an advantage when external borrowings are not available easily. Retained earnings indicates good business opportunities, It means organization is growing financially. It may result in better stock valuation of organization. In some situ.
Related slideshows
Answer Every investor expects dividend from his investments.Dividen.pdf
- 1. Answer: Every investor expects dividend from his investments.Dividend income helps investors in dealing with their routine expenses. Investors put their money to earn some positive returns and dividend is one of the way of getting returns for investors. So, It is a duty of management to satisfy dividend expectation of investors. If management do not pay dividend then it is known as retention of earnings. Retention earnings has it's own pro and cons, which are described as follows: Pros: Retained earnings reduces organization's dependence on external borrowings. It can be considered as an advantage when external borrowings are not available easily. Retained earnings indicates good business opportunities, It means organization is growing financially. It may result in better stock valuation of organization. In some situation dividend is subject to taxes (either distribution tax or income tax) in the hands of investors. So, in this case investors are not interested in dividend but they are more interested in capital gain(which may be tax exempt). So, In this situation retained earnings fulfill investor's objective. Cons: As explained earlier all the investors have some expectation of dividend, in case of higher retention of earnings it may become difficult to fulfill investor's expectations. Retention of earnings may affect investor's earning capacity when investors have available opportunities, which gives higher return than organization earns by retaining amount. In this case investor looses earning opportunities. In case of dividend management's decision is significantly influenced by media and institutional investors. Media is responsible for organization's image in society, such image significantly affects organization's financial performance. This is why management always considers media's point of view before making any dividend decision. Institutional investors are usually invests their money and takes part in decision making process of organization. Institutional investor's weight in decision making process is generally very high, so it is obvious that they influence management's dividend decision also. Solution Answer: Every investor expects dividend from his investments.Dividend income helps investors in dealing with their routine expenses. Investors put their money to earn some positive returns and dividend is one of the way of getting returns for investors. So, It is a duty of management to satisfy dividend expectation of investors.
- 2. If management do not pay dividend then it is known as retention of earnings. Retention earnings has it's own pro and cons, which are described as follows: Pros: Retained earnings reduces organization's dependence on external borrowings. It can be considered as an advantage when external borrowings are not available easily. Retained earnings indicates good business opportunities, It means organization is growing financially. It may result in better stock valuation of organization. In some situation dividend is subject to taxes (either distribution tax or income tax) in the hands of investors. So, in this case investors are not interested in dividend but they are more interested in capital gain(which may be tax exempt). So, In this situation retained earnings fulfill investor's objective. Cons: As explained earlier all the investors have some expectation of dividend, in case of higher retention of earnings it may become difficult to fulfill investor's expectations. Retention of earnings may affect investor's earning capacity when investors have available opportunities, which gives higher return than organization earns by retaining amount. In this case investor looses earning opportunities. In case of dividend management's decision is significantly influenced by media and institutional investors. Media is responsible for organization's image in society, such image significantly affects organization's financial performance. This is why management always considers media's point of view before making any dividend decision. Institutional investors are usually invests their money and takes part in decision making process of organization. Institutional investor's weight in decision making process is generally very high, so it is obvious that they influence management's dividend decision also.