Dividend policy Quiz Answer
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Part 2
These resources will help you to complete this discussion:
* Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2018). Corporate finance: Core principles and applications (5th ed.). New York, NY: McGraw-Hill.
* Chapter 16, “Dividends and Other Payouts,” pages 480–515. This chapter discusses dividend policy deals with real returns to shareholders. Short-term financial planning is the essential discipline of finance to ensure that the firm’s liquidity is intact and that ongoing operations of the firm are secure.
Dividend policy deals with real returns to shareholders, and, thus, it has a profound impact on stock valuation and price. Dividend policy is a signal to shareholders and other stakeholders. If dividends are increased, shareholders will assume that management likes the future prospects of the firm. Likewise, if dividends are not increased or, in fact, cut or suspended, that is a very negative telling sign.
By examining the importance of dividends to shareholders, you will see that half of the historical returns of the stock market came from dividends. In this post, discuss the following:
* What are some of the factors that go into management’s decision to initiate payment of dividends, or to increase or decrease dividends? Look at the history of a specific company, and use the information to explain.
* How can dividend policy impact the price of a stock?
* Why do some investors love dividends and some abhor dividends?
Part 3
These resources will help you to complete this discussion:
* Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2018). Corporate finance: Core principles and applications (5th ed.). New York, NY: McGraw-Hill.
* Chapter 18, “Short-Term Finance and Planning,” pages 550–581. In this chapter, see how short-term financial planning is the essential discipline of finance to ensure that the firm’s liquidity is intact and that ongoing operations of the firm are secure.
* Moy, R. (2013). Short term financial planning – uses and sources of cash [Video] | Transcript. Retrieved from https://www.youtube.com/watch?v=waO9sBRaSDc
Short-term financial planning is the essential discipline of finance to ensure that the firm’s liquidity is intact and that ongoing operations of the firm are secure. The examination of concepts like working capital, cash budgets, cash management, and short-term borrowing will show that without prudent attention to this area, financial distress will occur. Firms need to line up their needed capital not when they need it but before they need it. Hence, the planning and control functions that come into play in short-term financial planning are mandatory activities for all businesses, huge or small.
In this discussion, by being exposed to cash management and planning concepts, you will develop a better understanding and appreciation of the importance of this part of the finance discipline to the ongoing solvency of businesses.
Research a new start-up company (in business 1–2 years) that went bankrupt because they grew too fast. Explain how that can happen as it relates to short-term cash management.