Dividend, within basics implies to the distribution and value of shareholders. And as for dividend policy is what happens to the value of firm as dividend is increased, holding everything else, meaning capital, borrowings, etc., constant. Thus it is a trade-off between retained earnings on one hand and distributing cash or securities on the other. The dividend policy for any company is governed by the provisions of the Corporations Act, 2001. Section 254 T of the Act prescribes various circumstances in which dividend may be paid to the shareholders. The Act clearly prescribes that a company must not pay dividends unless its assets exceed its liabilities before dividend is declared and the excess is sufficient for payment of dividend. For instance a company dealing with hummer cars suffered a deficit of $ 50, 000 the same would be carried over to the present financial year as liabilities. Apart from that the most important factor that needs to be c...
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