Factors determining dividend policy include:a.Profitability and liquidity of the companyb.Stock price and market conditionsc.Taxation laws and regulatory requirementsd.All of the above

Dividend policies in practice vary across companies based on:a.Industry norms and competitive factorsb.Regulatory requirements and tax implicationsc.Cash flow availability and future investment opportunitiesd.All of the above

Dividend policies can impact a company's stock price because they:a.Affect investor perceptions of the company's financial healthb.Determine the total amount of cash available for investmentc.Determine the cost of equity capitald.Influence the company's capital structure

What are the 3 main dividend policies? As a manager, choose one that you think willbenefit the firm and justify your choice.

Factors affecting Dividend Decision

Dividend policy of a firm is governed by:(i) Long Term Financing Decision:As we know that one of the financing options is ‘Equity’. Equity can either be raisedexternally through issue of new equity shares or can be generated internally throughretained earnings. For Equity, retained earnings are preferable because they do notinvolve any floatation costs (issue expenses).But whether to retain or distribute the profits, forms the basis of this decision.Further, payment of cash dividend reduces the amount of funds required to financeprofitable investment opportunities thereby restricting its financing options.In this backdrop, the decision is based on the following:1. Whether the organization has opportunities in hand to invest the profit,if retained?2. Whether the return on such investment (ROI) will be higher than theexpectations of shareholders i.e. Ke?