Question

5. How can stability of dividend policy be maintained? The following information is collected from the current annual report of XYZ Ltd : Earning of firm Rs. 9, 00,000 Number of equity shares 1, 50,000 Return on Equity 22.5% Cost of equity 15% What should be the dividend payout ratio so as to keep the share price at Rs. 48 by using Walter Model? Also, determine the optimum dividend payout ratio and the market price of share at the optimum dividend payout ratio. What will the maximum and minimum share price under this model? 6. What do you mean by operating cycle?​

Answer 1

Answer:

Your answer is in picture.

Answer 2

Answer:

Operating Cycle-

• The operating cycle is the average amount of time it takes for a company to make an initial cash outlay, sell goods, and receive cash from customers in exchange for the goods.
• This is useful for estimating how much working capital a company will require to maintain or grow its operations.
• Examining a potential acquiree's operating cycle can be especially beneficial because it can reveal ways in which the acquirer can change the operating cycle to reduce cash requirements, which may offset some or all of the cash outlay required to buy the acquiree.

Explanation:

Factors influencing Operating Cycle-

All of the following factors influence the length of the operating cycle:

• Payment terms offered by the company's suppliers. Longer payment terms shorten the operating cycle because the company can postpone cash payments.
• Because a higher assumed initial fulfilment rate increases the amount of inventory on hand, the order fulfilment policy lengthens the operating cycle.
• The credit policy and payment terms, because looser credit means a longer period before customers pay, which lengthens the operating cycle.

As a result, several management decisions (or negotiated issues with business partners) can have an impact on a company's operating cycle. The cycle should ideally be kept as short as possible to reduce the business's cash requirements.

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