Category: FINANCIAL MANAGEMENT

According to MM, under a perfect market condition, the dividend policy of the company is irrelevant and it does not affect the value of the firm. According to the theory, the value of a firm depends solely on its earnings power resulting from the investment policy. “Under conditions of a perfect market, rational investors, absence of tax discrimination between dividend Read More …

M.J. Gordon also holds that dividend is relevant to the value of the company and dividend policy certainly affects the value of the company i.e. marker price of shares. According to Gordon, the market value of share is equal to the present value of future stream of dividends. Assumptions of Gordon’s model Only retained earnings are used to finance investment Read More …

According to Walter, the choice of the dividend policy almost always affects the value of the company. According to him, the dividend policy of the companies must be framed by keeping in mind the availability of new investment opportunities. If the company has abundant profitable investment opportunities, no cash dividends should he paid because retained earnings will be a source Read More …

The dividend policy comprises all aspects of dividend payments such as stability of dividend rate, time of payment, methods of payment, forms of payments etc. while formulating dividend policy covering all these aspects, one has to carefully study not only the company’s requirement but also the interest of shareholders. Some other economic factors must also be considered. Thus factors affecting Read More …