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Financial Management Essay

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Below is an essay on "Financial Management" from Anti Essays, your source for research papers, essays, and term paper examples.

It is the assumption among most, that managers make decisions that will maximize the wealth of the firms shareholders. One of these decisions is regarding dividend and what dividend policy a firm should carry out. The decisions managers make affect the amount of earnings a firm will distribute to its shareholders. Alternatively shareholders can sell their shares for more than they paid to acquire them. There are many different types of dividend policies with many different rules. For example consistent, consistent growing, proportionate, or even zero dividend policies. In early 2012 Apple Inc. announced that they would be paying out its first dividend in 17 years. They promised to pay back around $45bn to their shareholders over the next three years and also to spend about $10bn buying back shares (Waters FT). I will be analyzing the theory of dividends while referring it back to this event.

Prior to this announcement Apple had not paid out a dividend since 1995, since around the time the Steve Jobs had returned as CEO. Now that the company was once again financially healthy with a continuously increasing market share, it would seem like an excellent opportunity for an investor to purchase shares in. However, Apple didn't pay dividend, therefore some might argue against this. Because apple operated on a zero dividend policy,, shareholders could only make money by selling their shares. Although it is typical for a company that is growing so rapidly and making lots of cash to use a zero dividend policy and as they begin to reach maturity they begin to increase the dividend (Megginson et al 2008). Not paying a dividend means the company can be more flexible and is able to acquire other companies and invest heavily in research and development. If companies did pay out dividends during this stage they would need to borrow lots of money in order to make these investments, which are vital for the companies growth. Steve Jobs said that “Having all that money in the bank...

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Financial Management. Anti Essays. Retrieved December 10, 2018, from the World Wide Web: http://parimatch-stavka7.com/free-essays/Financial-Management-384541.html


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