Dividends

From an overall economic viewpoint, any investment proposal may be considered as an activity which initially absorbs funds and later generates money. The funds may be raised from loan capital or from shareholders capital, and the net (after tax and costs) money generated may be used to repay interest on loans and loan capital, with the balance being due to the shareholders. The shareholders profit can either be paid out as dividends, or reinvested in the company to fund the existing venture or new ventures. The following diagram indicates the overall flow of funds for a proposed project. The detailed cash movements are contained within the box labelled the project . 

From this overview it is apparent that the project must generate sufficient return on the funds absorbed to at least pay the interest on loans and pay the dividend expected by the shareholders. Any remaining cash generated can be reinvested in the same or alternative projects. The minimum return expected from the investment in a project will be further discussed in Section 13.4. 

The oil company s after-tax share of the profit is then available for repayment of interest on loans, distribution to the shareholders as dividends, or reinvestment on behalf of the shareholders in this or other projects. 

Distributed Darnings. The dividends distributed to stockholders provide the earning on equity capital ia the same way that iaterest is the earning on the debt capital. However, the dividends are an after-tax expense and represent an arbitrary management decision. 

Similarly, the distinction between current and long-term liabihties is also not clear-cut. Current liabilities include accounts payable (money owed to creditors), taxes payable, dividends payable, etc., if due within a year. Long-term liabihties include deferred income taxes, bonds, notes, etc., that do not have to be paid within a year. The owners equity includes the par, or face, value of the capital received from stockholders and any retained earnings. The balance sheet shows only the nominal value and not the current or real value of this capital. 

In both Eq. (9-127) and Eq. (9-128), the net annual profit can be either before or after tax. It can also include interest and dividends receivable, etc. 

Eany Common stockholders take the ultimate risk in a business ecause they have no right to a return on their investment. However, they have the right to elect the direciors of the company, who in turn are responsible for the management of the business. Stockholders are likely to vote the board of direciors out if adequate dividends are not paid. Usually the hability of stockholders is limited to the nominal, or par, value of their stock, and hence they can lose only what they have already paid for the stock. If the hability is not hmited by law, the personal assets of the stockholders are at risk in the event of company bankruptcy, in proportion to the amount of stock held. 

Preferred stock is often used as an alternative to debt when companies do not wish to issue additional common stock or to incur the fixed interest charges required to finance debt. Preferred stockholders are not normally allowed to vote for the board of direciors. They have the right to receive fixed amounts of dividends before common stockholders are paid any dividends. However, a company does not have to pay dividends. The board of directors may decide to pay small or no dividends in a particular year. Holders of cumulative preferred stock... 

The amount of retained earnings shown on a balance sheet should not be taken as a measure of the amount of future dividends that the company is hkely to pay. A contract may exist that specifies a minimum balance of retained earnings, which is then not available for dividends until bonds issued by the company have been retired. 

Dividends can be paid either as cash or in the form of an additional issue of stock. A stock split is really a stock dividend, and both are used to reduce the price of stock when management considers that it is too high. A stock dividend is essentially a transfer of retained earnings to the common-stock account and makes the amount transferred unavailable for future dividends. A stock dividend may be used in place of a cash dividend when a company is short of cash. 

A financial analyst looking at a company from a potential common stockholders point of view is hkely to classify preferred stock as debt. In contrast, bondholders and general creditors are likely to regard preferred stock as additional eqmty. Since preferred stock is a hybrid type of security, it may be issued by a company whose management is divided over the question of whether to use equity or debt to finance additional assets. However, preferred stock does have the disadvantage that the dividends are not allowed as a tax-deductible expense. 

The profit of 10 percent, indicated by ratio 3 in Table 9-26, will be reduced by any dividend due to preferred stockholders, because such payments are not part of fixed-debt expenses the residue is shared among the ordinaiy stockholders. If all the long-term debts were in redeemable 6 percent preferred shares, then (from ratio 3) the net annual profit (aftertax) is Av.vp = 0.10(0.40 A ), or 0.04 A. Interest due on preferred shares is 0.06(0.12 As), or 0.0072 As- Therefore, the earnings for the ordinaiy shares are... 

We notice in particular that inflation does not affect quoted interest rates when assessing present values of cost of capital. It must, however, be taken into account in assessing the interest rate on the dividend which will be expected by investors. 

A positive value of any term in Eq. (9-177) implies an increase in working capital, and a negative value a decrease. For example, the sale of fixed assets such as plant, buildings, land, etc., is a source of cash, and the purchase of fixed assets uses up cash. Similarly, an increase in financial resources in the form of loans and stock and bond issues is a source of cash, and a decrease in financial resources in the form of repayment of loans, retirement of stocks and bonds, and the payment of cash dividends uses up cash. (Note that a stock dividend as opposed to a cash dividend does not use up cash.)... 

In the case of whey, paint, and other midflux process fluids, mechanical energy at the membrane surface produces a larger dividend. For these applications, pumping for depolarization is much more important economically, but the trend toward lower-cost membranes has nonetheless shifted systems toward more membrane area. 

Since going online in 1993, the joint venture has reaped large dividends from the P15/P18 blocks of Holland s Rijn field, some 40 km (25 miles) from Rotterdam. BP-Amoco processes 13 MMm (500 MMft ) of natural gas from the field each day also, nearly 2,000 m (12,300 bbl) of condensate are produced daily. The project marks the first time Dutch gas has been produced to sales specification at an offshore location. Seven reservoirs, developed separately, are tied back... 

Tools to apply such a more broad view of a process would pay inherently safer dividends. One tool might include instructions on how to estimate the life cycle cost of proposed alternative solutions. Such a tool is not presently fully developed and available in the public domain. Training to assist in estimating life cycle cost is needed. 

This would affect every business that was linked to a computer juid the commotion and hysteria tliat surrounded the Y2K bug were due to the present age s dependence on computers. For c.xamplc, it was feared that the go eminent s computer system would print social security checks with amounts seen in the year 1900 and that banks would calculate dividends based on interest rates from the year 1900. The problems could have been catastrophic. Fortunately, tlie response to the "potential Y2K disaster was effective in that most corrections or patches were made before the year 2000. However, these corrections were costly and required large amounts of money to be spent." ... 

Teilunga-brucb, m. Math.) partial fraction, -ebene, /. plane of division, -flacbe, /. (Geol.) division plane, -gesetz, n. law of partition, -koeffizient, m. partition coefficient, distribution coefficient, -zabl, /. dividend. -zeicben, n. mark of division hyphen, -zustand, m. state of division. Teil-verflUssigung,/. partial liquefaction, -vor-gang, m. partial process, -wand, /. division wall. 

Because of this, all new machinery should be thoroughly inspected for defects before installation. Acceptance criteria should include guidelines that clearly define acceptable design/operational specifications. This practice pays big dividends by increasing productivity and decreasing unscheduled downtime. 

The ratio gives the return, which the dividend provides on the market price. 

The ratio indicates by how much earnings can fall before the dividend must be reduced and shows the company policy towards the payment of dividends and profit retention. 

It is probably fair to say that much time was wasted by other researchers in trying to uncover triads where they simply did not exist. Some pioneers, including Mendeleev, made it a point to turn their backs on numerical approaches such as Prouts hypothesis and the search for triads. This attitude certainly seems to have paid dividends for Mendeleev in that he made progress where others had failed to do so. 

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