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Dividend Policy - Investment Decision:
Dividend policy refers to being investment decision, if adopted their own decisions on the cash generated by operations and in such a situation, the effects of these decisions may extend the investment opportunities available to the organization, and then the private distribution decision profits here may reflect the investment problem necessitates the situation Own decision making is necessary to meet them.
The search for solutions to the dividend policy of investment problem may be imposed on the organization to wait until you decide to choose the available investment opportunities and the use of that remaining portion of the cash generated from operating profit in the distribution process after fulfillment of all the investment requirements of the Organization.
Profit Distribution Policy Financing Decision:
The organization may resort in some cases to rely on external source in the dividend, so as to avoid the investment problem arising from the monetary implications use for internal operations and in such a situation, may reflect the decision of the distribution of profits by using external funds (loans or new shares) private financing problem if this will affect the appropriate funding structure of the organization and this means primarily that the trend towards the use of the external source of financing for the distribution of profits, must be planned in the light of the determinants of the appropriate structure of financing, ie without prejudice to maximize Sa Per share to the maximum extent possible (to maximize the wealth of owners), and therefore the processing of this policy must be conducted in the light of the goal that the organization seeks to achieve, which is known to maximize the value of the organization - seed money invested.
The link between the policy of dividend distribution and investment and financing decisions seems clear through the following relationship:
Dividends = Cash generated from operating + External financing sources - Funds required for investment
This relationship shows us that the distribution of profits in the organization process, it is only the result of the difference between what is available for this organization of cash (internal or external) and what you need from Amul for investment operations and with the note that if the cash internal enough to cover investment or demands There is no need to obtain external funds as a way to finance the distribution.
Some factors that need to be taken into account in deciding a dividend policy are as follows:
1) Any tax legislation imposing a threshold in the amount of accumulated profits
2) Future plans (e.g. expansion) that need appropriation
3) Cash flows of the company in case of a cash dividend declaration
4) Tax consequences of dividend declaration
Factors affecting dividend policy:
*The company needs to adhere to the dividend policy while deciding the proportion of earnings to be distributed and the frequency of the distribution.
**Policy
**type of industry
**Age of corporation
**Ownership structure
**The extent of share distribution
