BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Principle of risk variations
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Principle of cost of capital
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Principle of dividend policy
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Principle of maturity of payment
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Principle of equity position
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Detailed explanation-1: -There are four types of dividend policy. First is a regular dividend policy, the second is an irregular dividend policy, the third is a stable dividend policy, and lastly no dividend policy.
Detailed explanation-2: -Regular dividend policy Under the regular dividend policy, the company pays out dividends to its shareholders every year. If the company makes abnormal profits (very high profits), the excess profits will not be distributed to the shareholders but are withheld by the company as retained earnings.
Detailed explanation-3: -Stable, constant, and residual are the three types of dividend policy. Even though investors know companies are not required to pay dividends, many consider it a bellwether of that specific company’s financial health.
Detailed explanation-4: -An appropriate distribution of collected funds in long-term and short-term assets (working capital) refers to allocation decision. The dividend distribution decision involves activities in relation to distribution of profit as a return back of earnings to its original investors, i.e., shareholders.