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Researching is very important part to understand about the exact step of CFOs. Knowledge matters when managers take participate in reality as how to make the financial condition completely successful along with a great fame. So, the prime question is what are the suitable steps of CFOs and what they desire to do?

This is important for all managers and thus rather than going through the data, direct questions to them make it more convenient to understand. Now, let us understand about the different points according to CFOs as follows-

  • According to them, payment is done through dividends because they get knowledge history. They do not think to cut any dividends. Along with rising of capital, they also permit to pay for those projects which are NPV-Positive.
  • They just claim that in case of dividends they do not take care about opportunities for investment.
  • According to the CFO, they take care about residual cash as well as investment opportunity when this is the case of buyback of shares. CFOs also think about own stock and thus whenever they have low price, they just try to purchase more shares.
  • Their main attraction point is catching up more institutional investors having dividends; however it is also true that accomplishing this with repurchasing of share is also possible.
  • What is the target of executives to make the market successful for them? They want dividend/share ratio should be 40%, ratio for dividend-to-earning should be 28% and the target for dividend-to-price ratio is 14%.
  • According to the mangers, repurchases offer a flexibility that is beneficial for a company in creating value and in case of dividends it is not perfect.
  • Repurchases are connected with compensation plans of stock and it is suitable as it offers the things just to satisfy their obligation to all employees.
  • It may happen that managers think about their own profits first rather than they think of a firm’s positive impact.  It is not true that always they think of their own benefit, but they always desire to get a good profit from their company. Reinvestment is good to increase share price as well as size of a firm, however those who are far away can have payout less than others. This is a prime reason of decreasing the firm size.
  • Financial executives who are dividend paying explain that they would like to have the money saved with the form of hypothetical  elimination of dividend, by means of paying debt rather than repurchasing of shares. Financial flexibility is somehow the most important part for CFOs and thus they avoid bond-rating downgrades.

After going through the above it is important to understand that only response to repurchase is 40% and consequences of personal income tax-respondents one-third part.

Now, some points that make the decisions strange as –

  • A hefty portion of CFOs think that it is very important to have automatically increment value and earning.
  • Dividends are always there to have get stability relevant to your future earning and CFOs believe this fact. They believe that nothing is imposed to the dividends as discipline or any extra feature. Moreover, it is also said that buyback and dividends always give equal information, which is inconsistent. Another odd conflict is there that they believe that an unimportant fact – dividends and payout carry info in the market.
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