Question

How does corporate dividend policies affect their ability to attain additional equity capital

Answer 1

There is always a direct relation between corporate dividend policies and companies value in the market.

This can be explanied with the help of following.

A) Better cash generating ability - Unlike companies that are not regular in paying divident companies that pay regular dividends tend to show that they cash generating ability and present a clear picture of their financial position

B) Better return on equity - If a company is regular in paying dividends it indicates that the company is having better return on equity and better return in net worth that means that the company is able to do business in a efficient manner.

C) No manipulation of accounts - It is pertinent to note that if a company is paying divident that means it is sitting on good liquid position unlike other companies even though they have cash in books but does pay dividend or spend capital expenditure may not have clean accounts .

D) High concern towards investors - Companies which pay regular dividend have a good concern over investors and share holders they generate wealth to them for investment they have made.

Hence in a conclusion we can say that if a company is having better corporate dividend policies it will have good reputation in the market and whoch inturn help the company inorder to raise additional capital.