What is the connection between the capital structure and the dividend policy?
The company's capital structure is a combination of long -term funding sources that provide income. Each business has a different capital structure, but common structures include different types of bonds and shares. Most shares pay dividends and dividends with higher payments often cause the company to sell multiple shares, which increases financing in the structure of capital. This is a surface relationship between capital structure and dividend policy.
shares of the company are ownership of the company purchased investors. Shares often apply regular dividends that are a return on initial investment. The ordinary shares are shares issued to the public with dividends, which are usually based on the financial health of the company. Preferred stocks can be offered privately and have dividends that apply at the set rates. Dividend policy decisions have far -reaching consequences that often affect the capital structure of society.
Investment Participants andCompanies have a common goal to increase wealth. Shareholders can only earn money from shares in two ways, either from dividend payments or sales to other investors. Trading with shares to other shareholders is natural for business - it does not earn or lose money from the store. The shareholder sells shares if the price falls or thinks the price will drop. Poor financial health, perceived fiscal failure and the possibility of reduced dividends are a reason for a decrease in stock prices.
Two ways that shareholders earn money from shares have more potential for the company's financial funds. This is because increased dividends can cause shareholders to buy more business shares instead of trading in market stocks. The connection between the capital structure and the dividend policy becomes more Complex as the increasing dividends reduce the amount of cash financingthe financial structures of the company. The company's financial manager is unlikely to risk an increase in dividend payments unless the company will be able to increase more stock sales than the dividends.
The primary goal of most corporations is to maximize the value of shareholders to maintain the inflow of investment money. Paying dividends may temporarily re -satisfy shareholders, but expenditure could reduce the amount of cash available for operational and capital expenses. This means that corporate financial managers must try to achieve a balance between capital structure and dividend policy. Expenditure on increased dividends have the potential to increase and reduce the amount of financing in the financial structure of the company.