HOTEL MANAGEMENT

1. RADHIKA GUPTA
12- BBA - HM

2.  A taxable payment declared by a company's board of directors and
given to its shareholders out of the company's current or retained
earnings, usually quarterly. Dividends are payments made by a
corporation to its shareholder members. It is the portion of
corporate profits paid out to stockholders. When a corporation
earns a profit or surplus, that money can be put to two uses: it can
either be re-invested in the business (called retained earnings), or
it can be distributed to shareholders.There are two ways to
distribute cash to shareholders: share repurchases or dividends.
Many corporations retain a portion of their earnings and pay the
remainder as a dividend.
 A dividend is allocated as a fixed amount per share.Therefore, a
shareholder receives a dividend in proportion to their shareholding

3. • For the joint stock company, paying dividends is not an expense; rather, it is the
division of after tax profits among shareholders. Retained earnings (profits that
have not been distributed as dividends) are shown in the shareholder equity
section in the company's balance sheet - the same as its issued share capital.
• Public companies usually pay dividends on a fixed schedule, but may declare a
dividend at any time, sometimes called a special dividend to distinguish it from the
fixed schedule dividends.
• Cooperatives, on the other hand, allocate dividends according to members'
activity, so their dividends are often considered to be a pre-tax expense.
• Dividends are usually paid in the form of cash, store credits (common among retail
consumers' cooperatives) and shares in the company (either newly created shares
or existing shares bought in the market.) Further, many public companies offer
dividend reinvestment plans, which automatically use the cash dividend to
purchase additional shares for the shareholder.

4. A firm cannot normally treat its dividend policy as
irrelevant. It must carefully evaluate its circumstances and
the environment in which it operates while hammering
out its dividend policy. Most companies seem to accord a
great deal of importance to their dividend decisions.The
dividend policy and the bonus policy are debated at great
length. Sometimes there are companies that make a short
cut of the dividend policy.The share holders bother a great
deal about the dividend policy, financial economists
considered the dividend policy as relevant, and corporate
management treat the dividend policy as a near after
thought

5.  Funds requirement
 Liquidity
 Availability of external sources of financing
 Shareholder preference
 Difference in the cost of external equity and
retained earnings
 Control
 Taxes

6. Q) From the following information supplied to you, determine the
theoretical market value of equity shares of a company as perWalter’s
model:
 Earnings of the company Rs 5,00,000
 Dividends paid Rs 300000
 Number of shares outstanding Rs1,00,000
 Price earning ratio 8
 Rate of return on investment 0.15

7. Sol) P= D+r/Ke(E-D)/Ke
=3+(0.15/0.125) (Rs 5-Rs3)/0.125
=Rs 43.20
Working Notes
(i) ke is the reciprocal of P/E ratio = 1/8
= 12.5 per cent
(ii) E = Total earnings ÷ Number of shares
outstanding
(iii) D = Total dividends ÷ Number of shares
outstanding