Section A: Answers to Corporate Finance Conceptual Questions
Ng Hui Xian thinks it doesn’t matter if the company pays dividends or not. He
suggests that shareholders can sell stocks and “make their own dividends” from their share sales.
While dividend payments are typically seen as a reliable sign of strength and longevity
within an established company, which can encourage more stock purchases from investors,
companies also have to be aware that the decision to start paying dividends is a very serious one.
Once implemented, they do not have the option of eliminating or reducing the payments unless
they XXXX XX anticipate investors XXXXXX interest in their XXXXXXXX, and XXX the overall value XX
XXXXX XXXXXX decrease. Because XX XXXX, XX-XXX-coming or XXXXXXXXXX XXXXXXXXX XXXX are still
XXXXXXXX a XXXXXXXXXX XXX XXXXXXXXXX or rapidly gaining popularity XXXX time, XXX chose XX
XXXXXX XXXXXXXXXX dividends, XXX instead reinvest XXXXX earnings. XXXX way they can add XX XX their
existing XXXXXXXX model XXX XXXXX XXXXXXXXXXXX, or XXXXXXX new XXXXXX, XXX so on.
One XXXXX they XXXXX do XXXX will provide interest to XXXXXXXXXXXX would XX XXXXXXXXXXXX
large share XXXXXX XX their own stock. This will XXXXXX XXX XXXXXXX XXXXX count, increasing XXX
XXXXX of the remaining XXXXXX. When XXXXXXXXXXXX XXXX advantage XX XXX stock XXXXXXXXX XXX sell
XXXXX shares, they may receive a higher profit XXXX if they XXXX XXXXXXXXX dividend payments.
In XXXXXXXX to XX Hui Xian, XXXXXXXX XXXXXXX out that the smaller shareholders XXX XXXX
out because XXXX haven’t invested XX XXXX as XXXXXX XXXXXXXXXXXX. Although they XXXXX gain
more by XXXXXXX their shares once their XXXXX has heightened, they may XXXXXXX XX XXXXXXX for the
XXXX instantaneous gain from dividends, XXXXX XXX generally XXXX out quarterly or XXXXXXXX.
Therefore, if a company does not XXXXXXX XXXXXXXXX XXXX XXXX they XX possess the necessary
“XXXX a tax XXXXXXXXXXX, our XXXXXXXXXXXX would XX better XXX XXXXXX the capital gains
XXX XXXX XXXXXX the tax XX dividends.”
XXXXXXXX the one XXXXX XXXXXXXX to receiving dividend XXXXXXXX XX that shareholders will
XX required XX file XXXX XX XXX same XXXX XXXXX XXXX in tax returns. XXXXXXX, when shareholders
rely on share XXXXX XXXXXX than dividends, they XXX XXXXXX the timing of XXX XXXX, XXXXX includes
XXX XXX payments. If XXXXXXXXXXXX hold XX to their XXXXXX XXX years, the XXXXXXXX-per-share and
XXXXX may appreciate XXXX XXXX, and they would XXXX receive a XXXXXX profit XXXXX paying the
capital XXXXX tax, which is XXXXXXXXXX XX XXX “XXXXXXXX XXXXXXXXXX” XXXXXXX the XXXXX’s XXXXXXXX
purchase XXXXX and the XXXXXXXXXX XXXX XXXXX, and only needs XX be XXXX XXXX XXX XXXXXX have
XXXX.
“XXXXX XXXXXX XX XX and XXXX XXX XX XXXXXX factors XX XXX’t XXXXXXX. X dividend is
XXXXXXXXX you can XXXXX on.”
As noted XX the above statement, XXX one XXXXXXX is XXXX XXXXXX may XXX always XXXXXXXX
in XXXXX. Sometimes their XXXXX may XXXXX, XXXXX results in an investor’s XXXX price being less
XXXX what XXXX XXXXXXXXXX paid. This is XXXXXX a “capital loss.” Investors can XXXXX take advantage XX
a loss XX offsetting XXXXX capital gains XXXXX will XXXXX XXXXX XXXXXX XXXXX. XX XXXXX capital losses
were XXXXXXX XXXX XXX XXXXXXX XXXXXXX XX report in XXXXXX tax returns in one year, they XXX XXXX
XXXX XXXXXXX to XXXXX XXXXX.
XXXX XXXXXXXXX, however, may XXXX that relying on the stock market in that XXXXXX XX
XXX uncertain, and may want XX XXXXXXXX XXXXX risks by XXXXXXXX a shareholder XXXX a XXXXXXXXXX
profitable XXXXXXX who will XXXXXXX XXXXXXX XXXXXXXX payments. Before XXXXXX shares, they
should study XXX XXXXX’s XXXXXXX, as XXXX as the company’s dividend payout ratio. This will show
XXXX the XXXXXX dividend per share divided XX XXXXXXXX per share. XX XXXX can offer a XXXX
dividend yield with a low payout ratio, it means XXXX the XXXXXXX XX less XXXXXX to stop paying
XXXXXXXXX in the XXXXX of a XXXXXXX XXXXXX.
Nonetheless, investors cannot XX given XXX-XXXXXXX-XXXXXXX certainty in any XXXX of
stock purchase, so XXXXX XXXX bet is to XXXX XX-XX-XXXX on their XXXXX’s XXXXX, and XXXX shares
quickly if XXXX believe there will be an economic XXXXX XXXX XXXXX XXXX XXXXXX XXXXXX XXXXXXX.
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