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. Factor s Affecting Dividend Decision, , ‘i, , , , ‘12. *State the twin (i.e., two) objectives of financial planning,, , Publications - sasticilieninnl, , 10. *Explain any four factors affecting dividend decision, Ans: Factors affecting dividend decision:, , Some of the important factors affecting dividend decisions are:, , ‘moe earnings Is a, (D Amount of earnings: Since dividends are paid out of current and past carninps, amount of g, , major determinant of the decision about dividend., er position to declare higher, , (2) Stability of earnings: Normally a company having stable earnings is in a bett, dividends., , eye e 5. of - chare 18 é sred if, (3) Stability of dividends: Stable dividend policy of a company will see that dividend pet share is not alterec, , the change in earnings is small., , Y ve ‘ ; a sei ms sy out of their, (4) Growth opportunities: Companies having good growth opportunities retain more money ot, , ; j : ‘ie ne dino ht he anies., eamings So as to finance the required investment. Therefore, the divided is smaller in growth compante, (5) Cash flow position: Availability of enough cash is necessary for declaration of dividend. Therefore, a, , business which earns profit with sufficient cash position can pay dividend., , (6) Share holders’ preference to get regular dividend is also one of the factors to be considered to declare, dividend., , (7) Taxation policy: If the tax on dividends is higher, less dividend is paid to shareholders., , (8) Stock market reaction: The possible impact of dividend policy on the equity share price is one of the, important factors considered by the management while taking a decision about it. Usually when dividend is, , declared, stock market reacts positively., , (9) Access to capital market: Easy accessibility to capital market enable companies to pay higher dividends., Because they need not retain their earnings to finance their growth., , (10) Legal constraints: Certain provisions of the Companies Act must be adhered to while declaring the, dividend. (Write any four points), , Financial Planning, , 11. *Give the meaning of Financial Planning. 2 Marks, , Ans: The preparation of a financial blue print of an organisation’s future Operations is called financial planning, The objective of financial planning is to ensure that enough funds are available at right time., , OR, , The process of estimating the fund requirement of a business and specifying the sources of funds is called financial, | S Is ancia, , Planning., , 2 Marks, , *) To see that the firm does not raise resources (i.e., funds) unnecessarily