It is mentioned the approach taken by the CFO is disposing off crown jewels of the company. If cash reserves are returned to shareholders, how does it increase the share price of the company?
Can you please also explain this line:
Also, the reason for the depressed share price may be because Pursuit Co’s shareholders
do not agree with the policy to retain large cash reserves.
Ask the Tutor ACCA AFM
Pursuit Co June 2011 v
2y ago#1The market value of shares depends on the future expected dividends. If they pay higher dividends due to distributing cash reserves then it can increase the share price.
Equally, if the company is retaining cash rather than distributing it as dividend it can depress the share price (subject to how the company is investing the retained cash).
Thank you so much, you are the best! :)
2y ago#3You are welcome.
Sign in to reply to this topic.