Financial Management: Dividend Policy, Mergers and Takeovers

FINANCIAL
MANAGEMEN

Table of Contents
INTRODUCTION...........................................................................................................................3
1. DIVIDEND POLICY..................................................................................................................4
1.1 The size of the annual dividend to return to its shareholders................................................4
1.2 Practical issues that need to be considered when deciding on the size of the dividend
payment........................................................................................................................................6
1.3 Effect of options on the wealth of shareholder......................................................................7
1.4 Critically discuss how company’s decision will be influenced by opportunity to invest
£70m in a project.......................................................................................................................10
2. MERGERS AND TAKEOVERS..............................................................................................11
2.1 Price / earnings ratio:...........................................................................................................11
2.2 Dividend valuation method..................................................................................................11
2.3 Discounted cash flow method..............................................................................................13
2.4 Problems associated with using the valuation techniques...................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
The organization is a mixed society that begins its work by accepting capital from individuals.
Individuals invest capital in the organization while continuing to receive a reasonable wage. If it
is not possible for organizations to make as much profit as possible for speculators they would
normally go into the currency show effectively, at which point it will be difficult to raise
additional capital for such organizations, just as capital does for new organizations. in the same
way it is difficult to breed.
Two groups; Squeezeco and Aztec cover both profit and union strategy and seek ideas; where the
profit system consists of three alternatives and we discuss the best method chosen to help the
organization. Then again; Trojan builds assess the fundamental issues facing Aztec while closing
the build estimate by discounting various tools such as the proportion of profit to value, the profit
estimation strategy and the use of the method limited income to assist manager’s dynamic
approach.

1. DIVIDEND POLICY
1.1 The size of the annual dividend to return to its shareholders
Dividend is the portion of an organization's profit that is pronounced and distributed as a
standard of offerings or a fixed sum for each offer, at the choice and discretion of the group's
Board of Directors. Profits are actually a small part of the remainder that remains after valid
settlement of various types of assets and liabilities and so on after deducting all expenses as
a full salary. People in the group are just above the rest, despite not being able to spread
them quickly. Since the organization does not need capital, at that point the organization can
withhold all profits by not taking them for profit. In this case, no profit is reported and the
total benefit can be a separate asset or an overflow. When deciding whether to disclose a
profit, directors must consider both (Renneboog and Szilagyi, 2020).
(i) Fair consideration to the shareholders:
Accountants should properly assess the extent to which investors hope to reach an exchange
for capital and risk-taking. In the event that this does not happen, it can be very difficult to
keep investors satisfied and this can also affect the market estimate of the group's offerings
and the generosity of the organization.
(ii) Company requirements:
Maintaining the financial position of the organization is the primary responsibility of
administrators, regardless of whether individuals are required to take penalties for doing so.
Similarly, it is important for the administrator to be able to adequately assess the level of
additional capital required by the organization for development and expansion.
Some of the factors to be considered while deciding size of annual dividend are discussed
below:
Current financial position of the company: Regardless of whether Squeezeco is able to
receive appropriate benefits and provide profits, it is possible to imagine that the
organization's financial position will not be with the ultimate goal of being able to provide