Question

You are a CFO analyzing a potential dividend payout policy. What factors would impact your decision regarding this type of policy? Discuss.

Answer 1

Dividend payout policy is policy regarding paercentage of net income comapny should pay as dividend. Dividend payout depends on various factors. factors affecting dividend payout policy is mention below:

1. availability of major investment opportunity

2. financing from outside is costly then comapny should use residual dividend policy.

3. Alternative sources of fund available in market and cost of financing from outside.

4. Total cash available in comapny and expected use of cash

5. analyzing whether dividend payment affect share price.