Affects of declaring dividends and liquidating
Investors prefer companies that have a track record of paying dividends as it reflects positively on its stability.
This indicates predictable earnings to investors and thus, makes the company a good investment.
Paying dividends to investors has several advantages, both for the investors and the company: The investors are more interested in a company that pays stable dividends.The ability and the willingness of a company to pay stable dividends over a good period of time and even increase them steadily gives a good picture about the fundamentals of the company.A dividend is a distribution of part of the earnings of the company to its equity shareholders.The payment of dividends requires a lot of record-keeping at the company’s end.The company has to ensure that the right owner of the share receives the dividend.
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When a company announces the dividend payments, it gives a strong signal about the future prospects of the company.