Financial Information
Financial Help please – Which of the following statements is likely to increase the dividend per share?
A company has a strict residual dividend policy. Ceteris paribus, A. The following factors are likely to cause to an increase in business volume, dividend per share? An increase in earnings net.b. The company increased the share of equity financing cible.C in the capital structure. An increase in the number of profitable projects that he wants to finance this année.d. States a and b are corrects.e. All of the above statements correctes.Réponse
Len
As a longtime investor in the Oil and Gas Royalty Trust (U.S.) going to be almost all the income tax rules under the authority of our confidence, for I will “one”, since distributions will always vote on something other than net income based. Receipts will not be imposed under the provisions of the trust subject to corporation tax significantly higher than in the case probably with a private person and his fundamental proportion taxableLe is dilutive financing and does not contribute to an arrangement for distribution. are willing to fund projects is not cash flow increased, because it can not happen. “B” is certainly not a component in a logic applies here, too, so a B & could not be accepted. Therefore, all statements are not in the correct “a” The key here. “A company follows a strict residual dividend policy ….” The Absolute is the only net inflows from trésorerie.Len
The answer is A.
Residual dividend policy is when company pays the shareholders only after making use of the net income to fund whatever project it wants to undertake, leaving the residual to shareholders.
Explanation:
A. With everything stay the same, an increase in net income will increase the residual dividend.
B. With higher equity financing structure, the company will need more net income to fund its projects, thus lower the residual dividend.
C. With higher number of projects to fund, more net income will be needed as well, thus reducing the residual dividend.
Let’s say net income is $ 1 million. Project financing is $ 2 million. If the capital structure is 60% debt and 40% equity, then only $ 0.8 million of the project be funded by net income, leaving $ 0.2 million as residual dividend to the shareholders.