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Dividend Payout Ratio


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dividend payout ratio by jim

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Dividend Payout Ratio

  1. 1. FUNDS REQUIREMENT: It’s a key factor influencing the payout ratio of a firm is its requirement of funds in the foreseeable in future. LIQUIDITY: Dividends entail cash payment. Hence, liquidity of the firm has a bearing on its dividend decision.
  2. 2. <ul><li>ACCESS TO EXTERNAL SOURCES OF FINANCING </li></ul><ul><li>Firms which has easy access to external sources of financing may feel less constrained in its dividend decision. </li></ul><ul><li>SHAREHOLDER PREFERENCE: </li></ul><ul><li>The preference of shareholders may influence the dividend payout ratio of the firm. </li></ul>
  3. 3. <ul><li>The cost difference between external equity and retained earnings has effect on external equity and retained earnings used by the firm. </li></ul><ul><li>CONTROL: </li></ul><ul><li>The new shareholders will have to share their control over the existing shareholders. </li></ul><ul><li>TAXES: </li></ul><ul><li>From 97-98 onwards dividends in the hands of individual shareholders have been exempted from tax. </li></ul>