Concepts goes in details of the dividend decision process and working capital management requirements.

1. Slides presented by Umamaheswari Gopal
 Dividend decision
 Determinants of
divident policy
 Dividend decision
factor
 Types of dividend
 Significance of stable
dividend policy
 Forms of dividend
 Objectives of stock
dividend
 Advantages to
investors
 Corporate divident
policy
 Inventory management
 Cash management
 Receivables
management
 Factoring

2. Decision factor
 High percentage of
dividend
 Maximum earnings per
share
 Portion of the earnings
distributed among the
shareholders.
High or low dividend
 While declaring
dividend:
 Issue high dividend-
less retained earning-
negative results on the
wealth of the company
 Issue low dividend-
increase retained
earnings- positive
reflects on the wealth
of the company.

3. Earnings retainment Distribution authority
 Stability of earnings
 Financing policy of the
company
 Liquidity of funds
 Dividends policy of
competitive concerns
 Past dividend rates
 Debt obligation
 Ability to borrow
 Growth needs of the
company
 Profit rates
 Legal requirements
 Policy of control
 Corporate taxation
policy
 Tax position of
shareholders
 Effect of trade policy
 Attitude of interested
group

4. Long term Wealth maximization
 Long term decision- company will pay dividend only
when there is no profitable investment opportunites
 Wealth maximisation decision- Higher value to the
near dividends than the future values in the market.


5. Constant percentage In addition to constant
 Constant dividend per share
 Constant percentage of net earnings
 Small constant dividend per share plus extra
dividend
 Dividend as fixed percentage of market value-
shareholders often translate their dividend income
into the percentage returns of market price of the
shares.

6. Necessities of it
Current trend &
expectations
 Confidence among shareholders
 Investors desire for current income
 Institutional investor’s requirements
 Stability in market prices of shares
 Raising additional finances
 Spreading of ownership of outstanding shares
 Reduces the changes of loss of control
 Market for debentures and preference shares

7. forms why
 Stock dividend
 Scrip dividend
 Property dividend
 Cash dividend
stock
property
dividendscash
scrip

8. why How is it helpful?
 Advantages:
 Maintainance of
liquidity postion
 Satisfaction of
shareholders
 Economical issue of
captialisation
 Remedy for
undercapitalisation
 Conservation of cash
 Lower rate of dividend
 Financing expansion
programmes
 Transferring the formal
ownership of surplus and
reserves
 Enhanced prestige
 Widening share market
 True presentation of
earning capacity

9. What do I get as an
investor?
How is it beneficial for
the company?
 Increase in their equity
 Marketability of shares
is increased
 Increase in income
 Increase demand for
shares
 Disadvantages
 A. for company
 Increase in capitalisation
 Issue of bonus shares
increase more liability on
the company on future
dividends
 Prevents new investors
form becoming
shareholders
 Control over the
management

10. Policies in india How do they affect?
 Payout ratio
 Stability of dividends

11. What is WC? CA-CL= WC
 Inventory management
 It refers to stocks, raw materials,components,spares or working progress maintainedin an
organisationto have continuousproductionand sales.
 It involvescontinuousflow of raw materials to productiondepartment.
 An efficient system of inventory management directlycontributesto the growth of
profitabilityof the business concern. Due to inflationand the conceptof time value of
money, inventorymanagement hasgained important regognition in the day to day
management of businessunits.

12. Why is it required? Scope and significance?
 To provide continuous supply of raw materials to carry out
uninterrupted production
 To reduce the wastages and to avoid loss of pilferage, breakage
and deterioration.
 To exploit the opportunities available and to reduce the cost of
purchase.
 To introduce scientific inventory management techniques
 To provide the right materials at right time, from right sources
and at right prices.
 Demand of good of ultimate consumers on time.
 Avoid excess and inadequate storing of materials
 Quality of raw materials
 Reduce order placing and receiving costs to the minimum.

13. Methods How is it different?
1.Fixation of levels
 Maximum level
 Reorder level
 Minimum level
 Danger level
2. ABC analysis
3. Economic order quantity
4. Perpetual inventory
system
5.VED analysis
6. FSN analysis
7. Periodical inventory
valuation

14. What is cash managment Why?
 Cash is the most liquid asset that a business owns.
It includes money and such instruments as cheques,
money orders and bank drafts.
 Rate of inflow of receipts and rate of outflow of cash
disbursements.
 A corporate financial officer should plan his cash
and credit sources in such a way that the normal
operations of the corporation are not disrupted by
cash and credit sources in such a way that the
normal operations of the corporation are not
because of liability to finance them.

15.  To make cash payments
 To maintain minimum cash reserve
Motives of Holding cash:
Cash is held by the firm with the following motives:
1. Transaction
2. Precautionary
3. Specualtion
4. Compensatory

16. Budgeting and
forecasting
Planning and optimizing
 Cash planning
 Managing the cash flows
 Optimum cash level
 Investing idle cash
Cash forecasting and budgeting:
Short term forecasting methods
1. Receipts and disbursement method
2.Adjusted net income method
3.long term forecasting

17. What are the models/ What do they specify?
To maintain the sound
liquidity position of the
firm.
Availability of cash to meet
the firm’s obligations when
they become due.
Decision influenced by trade
off between risk and return.
Investment in marketable
securities
Safety
Maturity
Marketability
 Cash mgt models
 Baumol model
 Miller-orr model
 Orgel’s model

18. Short or long As loans or other forms?
 Long term financing
 Short term financing
 Spontaneous financing
 Creditors and bills
payable
 Cost free
 Utilise sources to the
fullest extent
 Lt
 Loans from F.I
 Floating of debentures
 Issue of shares
 Raising funds by
internal financing

19. Current trend in
inventory management
Is it helpful?
 Finance
 Maintainance of
accounts
 Collection of debts
 Protection against
credit risks
 Additional charge
along with interest and
funded amount to the
factor
 Pricing of factoring
services:
 Administrative
aspect:0.5-2.5%
 Interest charges : 80%

20.  Full Factoring
 This is also known as "Without Recourse Factoring ". It is the most comprehensive type of facility offering all
types of services namely finance sales ledger administration, collection, debt protection and customer
information.
 2. Recourse Factoring
 The Factoring provides all types of facilities except debt protection. This type of service is offered in India.
As discussed earlier, under Recourse Factoring, the client's liability to Factor is not discharged until the
customer pays in full.
 3. Maturity Factoring
 It is also known as "Collection Factoring ". Under this arrangement, except providing finance, all other basic
characteristics of Factoring are present. The payment is effected to the client at the end of collection period or
the day of collecting accounts whichever is earlier.
 4. Advance Factoring
 This could be with or without recourse. Under this arrangement, the Factor provides advance at an agreed rate
of interest to the client on uncollected and non-due receivables. This is only a pre-payment and not an
advance.
 Under this method, the customer is not notified about the arrangement between the client and the Factor.
Hence the buyer is unaware of factoring arrangement. Debt collection is organized by the client who makes
payment of each invoice to the Factor, if advance payment had been received earlier.

21.  6. Invoice Discounting
 In this arrangement, the only facilityprovidedby the Factor is finance.In this method the client
is a reputed company who would like to deal with its customers directly, includingcollection,
and keep this Factoring arrangement confidential.
 The client collects paymentsfrom customer and hands it over to Factor. The risk involvedin
invoice discounting ismuch higher than in any other methods.
 The Factor has liberty to convert the facilityby notifyingall the clients to protect his interest.
This service is becoming quite popularin Europe and nearly one third of Factoring business
comprises this facility.
 7. Bulk Factoring
 It is a modified version of Involve discountingwherein notificationof assignment ofdebts is
given to the customers. However, the client is subject to full recourseand he carries out his own
administration and collection.
 8. Agency Factoring
 Under this arrangement, the facilities of finance and protection against bad debtsare providedby
the Factor whereas the sales ledger administration and collection ofdebts are carriedout by the
client.

22.  Major component of current assets
 Credit sales increases the TO and profit of the
business.
 Ac/R or sundry debtors
 Main obj- to maximise sales and profit with
liberal but sound credit sales policy

23.  Thank you for reading. Your comments are
appreciated!