Going concern 2

This topic has 3 replies, 2 voices, and was last updated 8 years ago by Ken Garrett.

Viewing 4 posts - 1 through 4 (of 4 total)

Author

Posts
June 12, 2018 at 8:07 pm #458499
jabbaraslam
Member
- Topics: 10
- Replies: 4
If there is an indicator in GC scenario question that “Company has decided not to pay a final dividend for the year”

So for its explanation would it be fine to write that “This may result in shareholders losing trust in company and they may decide to sell their shares leading to GC problem”
June 12, 2018 at 10:25 pm #458521
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10661
First, selling shares has no direct effect on going concern.

Not paying a dividend could be interpreted two ways: the company is simply in a dreadfully bad way, or the company is avoiding a future problem.

I don’t think it is straightforward. You can mention it, but give the alternative interpretations.
June 12, 2018 at 10:39 pm #458531
jabbaraslam
Member
- Topics: 10
- Replies: 4
What alternative interpretation should I give OR if I do not write this explanation then what explanation shall I write? Can you please suggest?
June 13, 2018 at 5:55 am #458543
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10661
Simply say that not paying a dividend could be a sign of cash flow problems, though the reason for non payment needs to be investigated. For example, the company could have decided to retain cash for an investment project.
Author

Posts

Viewing 4 posts - 1 through 4 (of 4 total)

The topic ‘Going concern 2’ is closed to new replies.