What are the potential consequences for companies whose dividend policies are out of step with their...

What are the potential consequences for companies whose dividend policies are out of step with

their financial performance?

Expert Solution

Consequences for the companies whose dividend policies are out of a step with their financial performance are as follows-

A. This company can employ capital in such projects which are not having a higher reinvestment rate, and they will be missing out the payment of dividend to the shareholders because payment of dividend will also mean an increase in share price.

B. these companies will be prone to liquidity risks because they will be having inadequate payment of dividend and they can impact the overall liquidity position of the company in the short run.

C.this company will generally unable to record sustainable growth for a longer period of time because dividend policies are not in line with their financial performance and that will lead to discrepancy in overall sustainable growth.

D.this company will not be preferable by the investors because they are not having a stable policy of payment of dividend and performance of these companies will be the deteriorating as dividend payments are not in line with the financial performance.

E. These business will not be able to re-invest into their own product properly and maximize their overall growth rate because they will be paying out whether excessive dividend or holding cash because their dividend policies are not in line with the financial performance.

F. These businesses will not be having proper synchronisation of business strategies according to the product life cycle and dividend policies are not adopted by this business adequately which will be not in line with proper financial performance.

jeff jeffy answered 2 years ago

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What are the potential consequences for companies whose dividend policies are out of step with their...

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