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Discuss the factors which a company may need to take into consideration when determining their dividend distribution and identify the three most commonly used dividends distribution policies.
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Discuss the factors which a company may need to take into consideration when determining their dividend distribution and identify the three most commonly used dividends distribution policies. A dividend policy is the plan of action adopted by the directors of a company whenever it is decided whether to distribute a company's profits as payments to individual shareholders. The decision of dividend policy is the responsibility of a company's directors. Under UK company law, directors cannot be forced to recommend a dividend and the shareholders cannot vote themselves a higher dividend than that recommended by the directors, although they may vote for a lower one. There are a number of factors that may influence a company's decisions regarding dividend distribution. One of these factors is profitability. The 1985 Companies Act prevents distribution of dividends from sources other than distributable profits; therefore, if a company is not profitable then it will not be able...
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