Alan Homes serves on the board of directors of Flynn Company. The president of Flynn told him
that in three weeks the corporation would announce a 25% increase in dividends. Alan called his
neighbor to tell him to buy some stock. The neighbor told his friend about the stock, and that
friend told him that Alan was acting unethically. The neighbor called Alan back, and Alan told
him that no one would know the difference, that in business this happens all the time, and that he
shouldn\'t be left out. Do you think Alan\'s behavior is appropriate? Write down your
recommendation to Allen\'s neighbor.
Solution
My recommendation to Allen\'s neighbor is not to buy the stock and reasons for this are given
below:-
1- If a company 25% increase in dividend that does not gaurantee of company\'s growth in terms
of funds and share
value.
2- The dividend paid to customers can not be utilized for growth of the business.
3- After paying high dividends Flynn has minimum money to growth the funds.
4- Investors will have to pay the tax on 25% dividend value received because dividends are
taxable article.
5- Dividends are not gauranteed income forever although it can be stopped any time by Flynn
company.
6- Dividends always have a broad effect on equity rates if any time dividends are cancelled then
share price will
increase at a higher rate and investors will definately loose his/her shares due to minimum
dividend pay out.
7- Only focusing on high dividend paying comapnies like Flynn will cut the maximum chances
of additional new
investment in market in terms of profit gaining.
Conclusion:- In my opinion Allen\'s behavior is not appropriate because of not
thinking/Analysing about profitability,overall debt management, liquidity ratios, asset
management, cash flow( in last 5 years) and long term investment plans of Flynn Company. All
these things mentioned above are very important for any investor to gain long term benefits from
Dividends..
General Principles of Intellectual Property: Concepts of Intellectual Proper...
Alan Homes serves on the board of directors of Flynn Company. The pr.pdf
1. Alan Homes serves on the board of directors of Flynn Company. The president of Flynn told him
that in three weeks the corporation would announce a 25% increase in dividends. Alan called his
neighbor to tell him to buy some stock. The neighbor told his friend about the stock, and that
friend told him that Alan was acting unethically. The neighbor called Alan back, and Alan told
him that no one would know the difference, that in business this happens all the time, and that he
shouldn't be left out. Do you think Alan's behavior is appropriate? Write down your
recommendation to Allen's neighbor.
Solution
My recommendation to Allen's neighbor is not to buy the stock and reasons for this are given
below:-
1- If a company 25% increase in dividend that does not gaurantee of company's growth in terms
of funds and share
value.
2- The dividend paid to customers can not be utilized for growth of the business.
3- After paying high dividends Flynn has minimum money to growth the funds.
4- Investors will have to pay the tax on 25% dividend value received because dividends are
taxable article.
5- Dividends are not gauranteed income forever although it can be stopped any time by Flynn
company.
6- Dividends always have a broad effect on equity rates if any time dividends are cancelled then
share price will
increase at a higher rate and investors will definately loose his/her shares due to minimum
dividend pay out.
7- Only focusing on high dividend paying comapnies like Flynn will cut the maximum chances
of additional new
investment in market in terms of profit gaining.
Conclusion:- In my opinion Allen's behavior is not appropriate because of not
thinking/Analysing about profitability,overall debt management, liquidity ratios, asset
management, cash flow( in last 5 years) and long term investment plans of Flynn Company. All
these things mentioned above are very important for any investor to gain long term benefits from
Dividends.
