week 5 discusion 1

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week 5 discusion 1

1) Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends. 
2) What are the principal considerations of a board of directors in making decisions involving dividend declarations? Discuss briefly. 
Answer
 
There are a few considerations that a board of directors must take before declaring dividends. 

Cash Dividends: Cash dividends come from retained earnings on the balance sheet. Also, if the preferred stock is cumulative, the company must pay past dividends before paying the current dividends.
Tax Factors: Unlike interests, dividends are not tax deductible and are paid from after-tax income. Also, dividends increase the taxable income of the shareholders. 
Growth Factors: Dividends limit the amount of money the company can invest in profit-making operations. The company must decide what is the best way to maximize shareholders wealth.
Cost Factors: Dividends reduce the amount of money the company can use to reduce its debt. The company may use dividend cash to improve long-term financial health of a company.
Other Factors: Dividend cut shows that the company is in trouble whereas a dividend boost shows that a company is stagnant or in decline.

References: https://smallbusiness.chron.com/mean-company-shows-dividend-21069.html (Links to an external site.) 
Instruction:
Write the answer for question no 1
write the peer reviw for question 2 and answer is there.

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