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sambecca
Joined: 01 Sep 2008
Posts: 1
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| Posted: Mon Sep 01, 2008 5:38 pm Post subject: How to determine if a company can afford dividends? |
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Hi -
I know about the divident payout ratio, but my question is how much cash should a company have on hand after paying dividends? Is there a set percentage of operating activities that should be on hand after paying dividends or is this something that every company determines internally?
Thanks -
Becca |
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Dominic Bradish
Joined: 13 Sep 2008
Posts: 9
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| Posted: Sat Sep 13, 2008 10:29 am Post subject: |
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| In some states, a corporation is required to keep on hand an amount equal to par value of all commen stock issued and outstanding. This is called legal capital. Another thing to consider is that companies should maintain short term assets enough to service current liabilities. |
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Des
Joined: 20 Sep 2008
Posts: 7
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| Posted: Sat Sep 20, 2008 11:34 pm Post subject: |
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As long as all requirements are met this is always up to the company. Their obligation is to their shareholders so they may feel that it's in their best interest to give a certain sized dividend or not at all.
In the event they project earnings to be less in upcoming periods they may not declare a dividend and instead roll it into retained earnings. |
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