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Financial Management Essay

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Added on  2020-06-04

Financial Management Essay

   Added on 2020-06-04

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Financial Management
Financial Management Essay_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3MAIN BODY..................................................................................................................................3Discussing the proposition that a company's dividend policy is irrelevant to its market value. .3CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
Financial Management Essay_2
INTRODUCTION Financial management is the process that investors and business units employ forensuring effective as well as efficient usage of funds. Attainment of high profit margin is one ofthe main objectives of both investors and business organization. With the motive to fulfill theexpectation level of investor’s business unit offers return to the shareholders in the form ofdividend. In the context of business unit, executives and management team plays a vital role insetting out dividend policy. Hence, in this, report will provide deeper insight about the aspects ofdividend relevancy and irrelevancy. Besides this, it also depicts the manner in which dividendpolicy has influence on market value. It also sheds light on the extent to which dividend policiesemployed by the firm create agency problem or issues. MAIN BODY Discussing the proposition that a company's dividend policy is irrelevant to its market valueIn the recent times, matter pertaining to the influence of firm’s dividend policy on thecurrent share price level has gained high importance. Now, from corporate officials to investorsas well as economists everyone is concerned about the impact that dividend policies of the firmhave on market value. Dividend irrelevancyAccording to the views of Hamza and Hassan (2017, p1), dividend irrelevance theoryentails that investors are not concerned with the dividend policies employed by the firm.Moreover, as per such theoretical framework, for fulfilling cash requirements investors can sellout the part of their equity shares. MM model states that dividend policy is irrelevant in a perfectworld where no taxes and bankruptcy costs take place. However, on the critical note, Wanjohi(2017, pp.183-205) stated that assumptions undertaken by MM are irrelevant pertaining to theexistence of perfect capital market with no tax implications. Further, such theory is alsocriticized as it assumes that wealth of the shareholders not highly influences from dividends. Therationale behind the same is transaction cost which in turn associated with the selling of shares orcash inflows. On the basis of this MM theory of irrelevancy, Ali, Mohamad and Baharuddin
Financial Management Essay_3

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