Joyride Books and Toys Ltd is an online retailer of children's books and toys. The business...
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Joyride Books and Toys Ltd is an online retailer of children's books and toys. The business is the brainchild of Joy Kumalo, who started the company six years ago. The business has grown exponentially, and its board of directors proposes that the business be listed on the JSE. Kumalo owns most of the shares (70%), and has agreed to let go of her shares as part of the public offering. The board is positive that the listing will be successful, so has decided to review the current dividend policy, as demanded by the chairperson. The chairperson feels the current dividend policy should not continue, as the focus has always been on expanding advertising and distribution activities, not paying an attractive dividend to shareholders. The CFO, on the other hand, feels that the chairperson's concerns are not valid, as the pattern of dividends has had no effect on shareholders' wealth. Joyride's dividend history since inception follows: Financial Year 31 December 2015 31 December 2016 31 December 2017 31 December 2018 31 December 2019 Profit after Tax R'000s 650 520 760 1,240 1,450 Ordinary Dividends R'000s 320 150 480 600 540 Ordinary Shares Issued R'000s 800 1,000 1,000 1,500 1,500 1.1 Briefly discuss the nature of dividend policy as a major component of the corporate finance strategy of Joyride Books and Toys Ltd. 1.2 Evaluate the viewpoints of both the chairperson and the CFO. 1.3 Analyse the dividend policy that has been pursued to date by Joyride Books and Toys Ltd and discuss whether a change will be in the best interest of the shareholders Joyride Books and Toys Ltd is an online retailer of children's books and toys. The business is the brainchild of Joy Kumalo, who started the company six years ago. The business has grown exponentially, and its board of directors proposes that the business be listed on the JSE. Kumalo owns most of the shares (70%), and has agreed to let go of her shares as part of the public offering. The board is positive that the listing will be successful, so has decided to review the current dividend policy, as demanded by the chairperson. The chairperson feels the current dividend policy should not continue, as the focus has always been on expanding advertising and distribution activities, not paying an attractive dividend to shareholders. The CFO, on the other hand, feels that the chairperson's concerns are not valid, as the pattern of dividends has had no effect on shareholders' wealth. Joyride's dividend history since inception follows: Financial Year 31 December 2015 31 December 2016 31 December 2017 31 December 2018 31 December 2019 Profit after Tax R'000s 650 520 760 1,240 1,450 Ordinary Dividends R'000s 320 150 480 600 540 Ordinary Shares Issued R'000s 800 1,000 1,000 1,500 1,500 1.1 Briefly discuss the nature of dividend policy as a major component of the corporate finance strategy of Joyride Books and Toys Ltd. 1.2 Evaluate the viewpoints of both the chairperson and the CFO. 1.3 Analyse the dividend policy that has been pursued to date by Joyride Books and Toys Ltd and discuss whether a change will be in the best interest of the shareholders
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11 Nature of Dividend Policy at Joyride Books and Toys Ltd Dividend policy refers to the decisionmaking process a company follows in determining the portion of its earnings to be distributed as divide... View the full answer
Related Book For
Strategic Management An Integrated Approach
ISBN: 978-1111825843
10th edition
Authors: Charles W. L. Hill, Gareth R. Jones
Posted Date:
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