Register now or log in to join your professional community.
Not necessarily. As long as there is no declaration to pay dividends and approved by the board, no liability on the part of the company. Hence, no increase whatsoever to stockholders.
iT DEPENDS UPON THE MANAGEMENT.
Whether they want to give away as dividends for keep it for contigencies.
Often it is kept as a reserve.
Decision depends on shareholders , in private entities there are no desires to give benefits to shareholders , this will increase company equity and enhance credibility of an entity in the market , specially if there are plans to go public or commence into joint operations or ventures.
in Listed companies they prefer to give a percentage from audited retained earnings to shareholders in cash or bonus shares , to increase market stock value and attract cash inflows from new joining public investors.
Although it looks good for a specific company to have a high amount of retained earnings, it does not by default mean that the company will distribute dividends for a variety of reasons. One factor is the management decision to keep the earnings in investing in other opportunities. Another factor is cash availability as having earnings does not necessarily mean that the company can distribute it to stockholders.
This doesn't mean payout but surely it means shareholder's wealth accumulation.
Small portion of retained earning to be passed to shareholders in term of dividend which will not affect company equity and keep shareholders happy and motivate them to invest more in company
It is subjective and totally a discretion of the management , however in general the retained earning are kept by the management to take care of the future plan/business expansion plans or acquisition of the company etc.. and or for any unforeseen contigencies.
It depends on the requirements of the company whether the company wants to utilize its retained earnings and use them as a source of Finance or not. It is totally a subjective decision and it never implies that the dividends to the shareholders will be increasing as the retained earnings increase over time.
Mainly, it is a topic of Financial Management and as it is said, "Financial management is not a science, it is an Art". - Source unknown.So it depends on the choice of shareholders whether they pay dividends from the increased retained earnings or use them as a mode of finance.
not necessary as long as the organization has a consistent dividend policy. some organizations have intention for growth in the market rather to be a valued stock since they overlook growth in their future ROE (return on equity).
No since high retained ernings are accumulated balances of profits,and its purly management decision to pay dividend out of that which may differ according to companies financial policies.