Financial Management: Dividend Policies and Investment Appraisal Strategies

Financial Management

INTRODUCTION
Financial management relies on the study of the ratios, equity capital. This is useful for asset
administration, earnings distribution, investment funding, seeking to protect and track the
fluctuations of foreign exchange and product cycles (Anthony, 2019). A business has to manage
the finances wisely to maximise their earnings and it is important that the finances it obtains are
invested in such a manner that the investment profits are higher than the financing costs. The
study is focused on two separate topics related to dividend policies and investment appraisal
strategies that executives use to determine best-favourable investment initiative. Such concepts
assist in making strategic investment decisions, and also what activities they must take to
maximize their share of the market.
MAIN BODY
Question 1
1. Size of the annual dividend which return to its shareholders
Dividend is really just the proportion of the company's earnings 'income under the board
members' decision and selection; it is announced and charged as a percentage of par shares or per
security (Khan, 2020). Furthermore, dividend is a proportion of the surplus that occurs after
sufficient allocation has been made for different types of services and taxation etc. after all
spending has been subtracted in total revenue. Representative have such a duty to make this
profit, however though they can not commit to its immediate selling. When the business requires
profits then the company can retain the entire share of the income even without dividend being
paid. Dividend is therefore not reported in the event that the total income is required to be in the
form of specific funds or surplus. When deciding on dividends paid, proprietors will take into
consideration the usual two things listed below:
Fair consideration:
Managers must have a fair assessment of the level with which owners expects to receive
money benefit and take risks in return. When it is not completed, it can be difficult to keep the
creditors absolutely happy and that will also have a negative effect on the market results of
goodwill shares of the group.
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Company’s requirement:
Managing the ultimate financial position is executives' main responsibility, particularly
when leaders are being forced into making other concessions to do so. It is therefore incredibly
critical for the lender to be able to assess exactly how much additional capital the business
requires to prosper and develop.
Factors determined at the time making dividend decisions:
At the time of making decision in respect of dividend which going to distribute to the
shareholders; managers consider some factors which are as follow:
Nature of business: It would be only Squeezeco Company who periodically distributes
profits, and who provides dividend on monthly basis. Firms in this category have companies
producing products for everyday use (Greve and Man Zhang, 2017). Only companies that
participate in the public service shall regularly pay shareholder dividends. Industries dealing with
producing costly goods could not manage to pay dividend on a regular basis.
Life of firm: Emerging companies are therefore reluctant to pay decent dividends within
a few times to shareholders. In their early years they would require sufficient capital for growth
that they are never in a position to obtain easily through the marketplace. And they'd come back
with their very own inner financial capital. In contrast, older companies may require relatively
less capital but they collect it from the economy even though they do. Under such a case a
Medium Dividend Plan should be enforced.
Financial position: However, if the Squeezeco receives enough money to pay dividends
owing to its profit status, those who have not been able to pay cash dividends. Despite the
revenue and excess a corporation's liquid placement can worsen. For this situation, the
corporation needs to pay dividends in the form of shareholdings.
Financial requirement: The dividend payout plan also affects financial goals of the
Squeezeco. When a specific development program happens before the company, instead such a
organization would need to follow a strict dividend policy so that new money can be efficiently
handled by limited access. In this circumstances, greater emphasis should be given to the re-
appropriation of income.
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