Question

In order to learn more about the industry and to meet people who could give her advice, Kate attended

several industry trade shows. At the most recent trade show, Kate was introduced to Fred Abbott, op-

erations manager of “Sentiments,” a national card distributor. After much discussion, Fred asked Kate

to consider being one of Sentiments’ card suppliers. He provided Kate with a copy of the company’s

recent financial statements. Fred indicated that he expects that Kate will need to supply Sentiments

with approximately 50 card designs per month. Kate is to send Sentiments a monthly invoice, and she

will be paid approximately 30 days from the date the invoice is received in Sentiments’ corporate of-

fice. Naturally, Kate was thrilled with this offer, since this will certainly give her business a big boost.

f. How could Kate determine whether Sentiments pays a dividend?

Answer 1

Sentiment had handed over to Kate the company's recent financial statements when he was considering Kate to be one of his card suppliers. The notes to accounts contain a note wherein the dividend amount and policy of payment of dividend is mentioned.

Also, in the financial statements, the cash flow statement shows an outflow in the "Financing Activities" from where the payment of dividend can be traced easily.

This shows that Sentiment's company is a growing company and has a good credit worth.