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Chapter 15: Question 19Q (page 810)

What factors influence the dividend policy of a company?

Short Answer

Expert verified

Dividend policies are affected by the profitability and availability of cash in the business.

Step by step solution

01

Meaning of Dividend Policy

Dividend policies outline how a company's dividend payments to shareholders will be structured. It helps a company decide how much and when dividends should be declared and paid.

02

Factors Influences Dividend Policy

The following factors influence the dividend policy of a company:

  1. The consistency of earnings.
  2. Current earnings.
  3. Earnings potential.
  4. Working capital or retained earningscontractual limits exist or do not exist.
  5. A balance of retained earnings.

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Most popular questions from this chapter

On February 1, 2017, Buffalo Corporation issued 3,000 shares of its \(5 par value common stock for land worth \)31,000. Prepare the February 1, 2017, journal entry.

Ravonette Corporation issued 300 shares of \(10 par value ordinary shares and 100 shares of \)50 par value preference shares for a lump sum of \(13,500. The ordinary shares have a market price of \)20 per share, and the preference shares have a market price of $90 per share.

Instructions

Prepare the journal entry to record the issuance.

What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

Weisberg Corporation has 10,000 shares of \(100 par value, 6%, preference shares and 50,000 ordinary shares of \)10 par value outstanding at December 31, 2017.

Instructions

Answer the questions in each of the following independent situations.

  1. If the preference shares are cumulative and dividends were last paid on the preference shares on December 31, 2014, what are the dividends in arrears that should be reported on the December 31, 2017, statement of financial position? How should these dividends be reported?
  2. If the preference shares are convertible into seven shares of \(10 par value ordinary shares and 3,000 shares are converted, what entry is required for the conversion, assuming the preference shares were issued at par value?
  3. If the preference shares were issued at \)107 per share, how should the preference shares be reported in the equity section?

Cole Inc. owns shares of Marlin Corporation stock. At December 31, 2017, the securities were carried in Cole’s accounting records at their cost of \(875,000, which equals their fair value. On September 21, 2018, when the fair value of the securities was \)1,200,000, Cole declared a property dividend whereby the Marlin securities are to be distributed on October 23, 2018, to stockholders of record on October 8, 2018. Prepare all journal entries necessary on those three dates.
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