A summary of Entity A's operations is presented below (amts in millions). A. You have been asked
Question:
A summary of Entity A's operations is presented below (amts in millions).
A. You have been asked to help formulate a cash dividend police for this tech company which went public in 2016. The principal in charge of the engagement suggested.
Computing the following rations for each year.
1. Return on assets (express as percentage, e.g. 5.23%)
2. Profit margin (same as above)
3. EPS
4. Price / earnings
5. Current ratio
B. She than asked you what factors the board should consider in setting a dividend policy. Shc explained that the founding principal stockholders (3), all board members and high net-worth individuals, have relied on retained earnings to finance expansion and are concerned about having the cash to pay dividends on a regular basis. One of the principals discussed this with his accountant who mentioned something about a stock dividend. Another principal suggested that not declaring a cash dividend is holding the stock price back. Discuss the various factors the board might want to consider in setting a dividend policy. Does the firm's performance justify a dividend? C. Suggest a cash amount per share for the dividend and justify your choice. Explain what the dividend payout ratio would have been in 2018 under your suggestion, as well as the dividend yield based on the average market price of the stock in 2018.
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin