Page 200 - DMGT409Basic Financial Management

Unit 12: Dividend Policy

9. Payment of dividend is prohibited when the firm is insolvent. Notes

10. There is no relation between financing decisions and dividend decision.
12.7 Review Questions

1. ‘Payment of dividend involves legal considerations’ - Discuss.

2. Explain the factors that influence the dividend policy of a company.
3. Is there any relation between the dividend policy and value of a form? Give suggestions
with some live market examples.

4. Briefly discuss the legal and procedural aspects of dividends according to company’s law.
5. Discuss the dividend procedural aspects.

6. Inflation is a factor that influences dividend policy indirectly. How?

7. Why companies go for no divided policy?
8. A stable dividend policy is advantageous for both the company and the shareholders.
Discuss.

9. The age of company has more impact on distribution of profits as dividends. Give some
suggestions in support of the above statement.
10. Illustrate constant payout ratio with suitable example.

Answers: Self Assessment

1. Net earnings 2. value

3. Long-term fi nance 4. Stable dividend
5. Stock split 6. True
7. False 8. True

9. True 10. False
12.8 Further Readings

Books
Chandra, P. Financial Management - Theory and Practice, New Delhi, Tata McGraw-
Hill Publishing Company Ltd., 2002, p. 3.
Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008

Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996. p. 2.

Online links
http://www.fei.org/
www.scribd.com
www.globusz.com

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