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Direction: Read the following text and answer the questions given below:
‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.
It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.
The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.
Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?
  • a)
    Cash flow position
  • b)
    Stability of earnings
  • c)
    Amount of earnings
  • d)
    Access to capital market
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Direction: Read the following text and answer the questions given bel...
The payment of dividend involves an outflow of cash. A company may be earning profit but may be short on cash. Availability of enough cash in the company is necessary for declaration of dividend.
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Direction: Read the following text and answer the questions given bel...
Understanding Cash Flow Position
The statement “There is availability of enough cash in the company” refers to the cash flow position, which is a critical factor in deciding dividend policy. Here's a detailed explanation of why this factor is essential for Spun Ltd.:
1. Importance of Cash Flow
- Cash flow is the net amount of cash being transferred into and out of a business.
- A strong cash flow position indicates that a company has enough liquidity to meet its operational expenses and financial obligations, including dividend payments.
2. Impact on Dividend Decisions
- Regular Income for Shareholders: Spun Ltd. has many shareholders looking for regular income. A positive cash flow allows the company to distribute dividends consistently.
- Sustaining Growth: With ample cash, the company can invest in growth opportunities while also rewarding shareholders, striking a balance between reinvestment and distribution.
3. Compliance with Loan Restrictions
- The company has taken a loan from ICICI, which imposes certain restrictions on dividend payments. A healthy cash flow can help Spun Ltd. navigate these restrictions while still providing returns to shareholders.
4. Future Prospects
- Given the good prospects for growth and increasing demand, having sufficient cash ensures that Spun Ltd. can take advantage of new opportunities without jeopardizing its ability to pay dividends.
In conclusion, the availability of cash directly influences the company’s ability to declare and pay dividends, making cash flow position a pivotal factor in Spun Ltd.'s dividend decision-making process.
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Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer?
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Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce. Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
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It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Direction: Read the following text and answer the questions given below:‘Spun Ltd.’ is a company manufacturing cotton Yarn for the past 15 years. It has been consistently earning good profits for many years and is a market leader. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future as the demand for its products has been consistently increasing. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices and has been able to maintain the same for the past several years.It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from ICICI and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.Q. ‘There is availability of enough cash in the company.’ This statement represents which factor affecting the dividend decision of Spun Ltd.?a)Cash flow positionb)Stability of earningsc)Amount of earningsd)Access to capital marketCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice Commerce tests.
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