Reference no: EM132974063

Dividend Policy and Retained Earnings

Problem 1: "Since initial contributed capital theoretically belongs to the stockholders, why are there legal restrictions on paying out the funds to the stockholders? Do you think this is fair?"

According to the article,"Dividends-Definitions and rights" It mentions that the dividend payments that are made by a company to one or more of their shareholders with the respect to it`s stock. Additionally, a part of the company profits has paid out stockholders. Moreover a dividend is considered a taxable income. As a result, these dividends are handled on a cash basis, store credits which include shares in the business either newly created shares or pre-existing shares for the shareholders. In fact ,normal cash dividends are paid out of a business profits to the shareholders. In my opinion, I don't think it is fair. The particular reason for the circumstance is that things have to get done well in order for be success. Furthermore, if funds were made to the company why have restrictions, if that money was donated it should be used for the company and employees.(Stimmel & Roeser 2021)