Terry International Ltd. earned a net profit of Rs. 50 crores. Ankit, the finance manager of Terry International Ltd, wants to decide how to appropriate these profits. Identify the decision that Ankit will have to take and also discuss any five factors which help him in taking this decision.

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Solution

Dividend decision
Factors affecting dividend decision:
(i) Amount of earnings (ii) Stability of earnings
(iii) Stability of dividend (iv) Growth opportunities
(v) Cash flow position (vi) Shareholders preference
(vii) Taxation policy (viii) Stock market reaction
(ix) Access to capital market (x) Legal constraints
(xi) Contractual constraints

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