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Case Study

Computer Tech Ltd. is a leading IT outsourcing company in India that provides business consultancy and outsourcing services. Over the past five years, it has paid high dividends to shareholders. However, this year its earnings are high but liquidity is low, and it plans to expand into new ventures.

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JYOTI KUMARI
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1K views1 page

Case Study

Computer Tech Ltd. is a leading IT outsourcing company in India that provides business consultancy and outsourcing services. Over the past five years, it has paid high dividends to shareholders. However, this year its earnings are high but liquidity is low, and it plans to expand into new ventures.

Uploaded by

JYOTI KUMARI
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

. Computer Tech Ltd.

, is one of the leading information technology outsourcing


services providers in India.  The company provides business consultancy and
outsourcing services to its clients.  Over the past five years the company has been paying
dividends at high rate to its shareholders.  However, this year, although the earnings of
the company are high, its liquidity position is not so good.  Moreover, the company
plans to undertake new ventures in order to expand its business.

In context of the above case:

1. Give any three reasons because of which you think Computer Tech Ltd. has been
paying dividends at high rate to its shareholders over the past five years.
2. Comment upon the likely dividend policy of the company this years by stating
any two reasons in support of your answer.

Ans.

1. Computer Tech Ltd. has been paying dividends at high rate to its shareholders over
the past five years because of the following reasons:

1. Earnings:
2. Cash flow position:
3. Access to capital market:

1. This year the company is likely to follow a conservative dividend policy because of
the following reasons:

1. The cash flow position of the company is not god and dividends are paid in cash.
2. The company may like to retain profits to finance its expansion projects.  Retained
profits do not involve any explicit cost and are considered to be the cheapest source of
finance.

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