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Why capital can not be return to the shareholders by way of dividend???
Thanks for invitation
The acceptance of limited liability has led to a need to protect the capital contributed by the members since the members cannot be required to contribute funds to enable the company to pay its debts once they have paid for their shares in full. The capital therefore represents a guarantee fund for creditors.
There are provisions designed to prevent the capital being ' watered down' as it comes into the company.
the capital can not be return to the share holders by way of dividend just because their shares are what are producing the result after one year of good activities and one part of this result is divided according to the number of shares and distributed between share holders. But if they touch the shares this means that there is no more capital and the company no more exist.
because shareholder are going to invest for share of profit and lose. shareholder can sale the share in the market.
Capital can't be returned to shareholders by the way of dividends simply because dividend by definition is the share in the profits of the business. This share in profits is based on how much you have invested in a company. You are legally entitled to a share in profit as long as you have your funds 'capital' invested in the company. Your invested capital ' your shares' can grow in market value if the company is profitable and you can get much more than you had invested back by selling your shares in the stock market. If you choose to do so, you will get your invested capital back plus more 'capital gain'. As soon as you sell your shares in the stock market, you cease to remain the the shareholder of the company and are no longer entitled to any dividends.
I agree with colleagues answers
A dividend is a portion of the profit that company paid to each of the shareholder. There are number of arguments why a company might choose to pass some of its earnings as dividend. There are also a number of reasons as why a company prefers to reinvest all of its earning back into the business. Briefly, following are the factor that forces the company not to pay dividend.
CONTINOUS GROWTH
A company that is growing rapidly usually prefers not to pay dividends, because it wants to reinvest into further growth or it believes that it will do a better job of increasing its value.
NEW BUSINESS OPPORTUNITIES
A company might have planned to start a new project, acquire new assets, repurchase some of their shares, or even buy out another company.
TAX PERSPECTIVE
A company might be thinking that not to pay dividends are more beneficial to investors from a tax point of view i.e. tax on dividend may be higher than the capital gain tax.
STOCK ISSUANCE COST
A company may also be thinking of about the high potential expense of issuing new stock. To avoid the risk of needing to raise money this way, they choose to keep all of their earnings.
BORROWING FROM FINANCIAL INSTITUTIONS
A company internal rate of return may be higher than the cost of capital to be paid to raise the fund.
CONSISTENCY IN DIVIDEND POLICY
A company may also opt not to start or pay a dividend because eliminating or reducing dividend payment may be viewed unfavorably and its stock price may decrease.
In short, a prudent dividend policy has to be formulated after considerable thought of future growth and small shareholder interest.
Divident is the return on investment, which is given in ratio to the shares holding by the share holder. Capitals can returned by buying the Shares from share holder.
Thank you for the invitation and I agree with Mr. Mohamed
