The paper “ Impact of Level of Debt and Dividend Policy on the Value of a Firm” is a cognitive example of a finance & accounting coursework. The level of debt and dividend policy that affect the financial gearing influences greatly the value of a firm. This financial aspect of a company floated in the country with a stock exchange that is undervalued provides a deeper understanding of debt and dividend policy in regard to the value of a firm. The capital structure consists of both debt and equity capital.
The apt combination of equity and debt capital brings about the required standards that are needed for financing, operating, and investing activities within the business organization. The combination of debt and equity gives investors, governments, and lenders a quick glance at the financial strength of the firm and whether the firm is in a position to meet its financial objectives. Shareholders' value is what is delivered to shareholders due to the ability of management to grow share price, dividends, and earnings (Feldstein & Green, 2002, p. 33-9). The shareholder's value in the summary of all strategic decisions has an impact on the ability of the firm to increase efficiently the amount of cash flow in the firm over a period of time.
This paper examines the implications of dividends policy and debt level on the value of a firm through analyzing different theories and concepts. The effects of dividend policy and debt level on a firm operating in a country where the stock exchange is underdeveloped have been highlighted. Implication debt level and dividend policyIt has been established that various research studies that dividend policy can make a significant effect on corporate future value when implemented and followed carefully.
The objective of wealth maximization is a prevalently accepted objective of business since it reconciles the various and usually conflicting stakeholders’ interests. The fascination of shareholders value is gaining popularity due to several advancements that include: • The corporate takeover threat by those looking for undermanaged and undervalued assets. • Impressive endorsement through corporate leaders who use the approach
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