What is the goal ratio?
The target pay ratio is a specific objective set by the Company for the payment ratio achieved by the company. The ratio focuses on creating an ideal balance between the percentage of the income collected, which are set aside for paying dividends for investors, as well as the creation of an allocation process that ensures that the goal or goal is consistently met. The calculation of this type of ratio requires projection of realistic objectives for income generation, which makes it easier to determine when and how much of these income to allocate in order to pay the agreed amount in dividends to investors.
Based on its base, the objective is a goal set after the development of a good idea of how many earnings will occur in a given accounting period and the use of such data is determined by a fair benchmark for the dividend payment. Usually the payment is expressed as a percentage of earning, a hundred percentage opinion based on the total recruited income, but allowing the company's debt obligations and the need to keep the company financially solvent. Since the target pay ratio is a percentage, it means that the actual amount of dividends paid to the investor will vary depending on the actual income generated during the considered period. The advantage for the company is that from the ratio is that in the period in which lower earnings occur, the actual amount of dividend payments will be smaller, causing less financial burden on the company's resources.
Since the target payout ratio is actually the goal, there is always a possibility that the company will meet this objective. This may occur due to the occurrence of events that are out of business control and are included in a number of events that allow companies to postpone or not issue dividend payments for this accounting period. In addition, if the ratio is not based on adequate projections for income, there is a great chance that reaching the goal will be difficult, not if impossible.
determinationThe target payout, which is adequate in terms of the performance of the company, and the need to generate fair dividends for investors requires careful consideration of all aspects of the operation. The company's ability to increase sales that results in greater income collected, the opportunity to reduce the costs so that a larger proportion of these profits can be assigned to the implementation of dividend payments, and even consider prospects for the economy generally entering the game. The correct assessment of all known factors can determine the feasible payment ratio of the goal of the goal, which is in the best interests of all involved.