Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 1QE
Explain the theory behind the dividends-based valuation approach. Why are dividends value-relevant to common equity shareholders?
Expert Solution & Answer
To determine
Explain the theory behind the dividends-based valuation approach, and also discuss the value-relevant to common equity shareholders.
Explanation of Solution
Cash dividend:
The amount of cash provided by a company out of its distributable profits as a return for the amount invested by them is referred as cash dividend.
Straightforward is the theory behind the dividends-based valuation approach. As the dividends are cash flows directly to the equity shareholders, dividends are value-relevant to common equity shareholders.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Why dividends are not deductible?And what could be the order of priority regarding income and assets in terms of preferred or common stock?
What is the assumption of the dividend growth model? Comment on the reasonableness for the assumptions of the dividend growth model.
Define dividend policy. Why do investors want dividends? Explain the different types of dividends.
Chapter 11 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What is dividend policy? Discuss the factors that influence a company's dividend policy. What are the key theories explaining dividend policy?(Subject: General Finance)arrow_forwardThere are a number of factors that need to be taken into consideration as to whether to pay dividend or retain earnings. Discuss four (4) factors to be considered in establishing an optimal dividend or retention policy.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY