Q.28 Computer Tech Ltd. is one of the leading information technology outsourcing
services providers in India. The company provides business consultancy and
outsourcing services to its clients. Over the past five years the company has
been paying dividends at high rate to its shareholders. However, this year,
although the earnings of the company are high, its liquidity position is not so
good. Moreover, the company plans to undertake new ventures in order to
expand its business. In context of the above case:
a)
Give any three reasons because of which you think Computer Tech Ltd.
has been paying dividends at high rate to its shareholders over the
past five years.
Comment upon the likely dividend policy of the company this year by
stating any one reason in support of your answer.
(4)
b)
Answers
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13
Answer ⤵️
Role of Financial Management
To determine the capital requirements of business, both long-term and short-term.
To determine the capital structure of the company and determine the sources from where required capital will be raised keeping in view the risk and return matrix.
To decide about the allocation of funds into profitable avenues, keeping in view their safety as well.
To decide about the appropriation of profits.
To ensure efficient management of cash in order to ensure both liquidity and profitability.
To exercise overall financial controls in order to promote safety, profitability and conservation of funds.
Answered by
15
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