Avon's Dividend Policy

TABLE OF CONTENTSINTRODUCTION3PERFORMANCE OF AVON?S STOCK FROM 1978-19883EVALUATION OF AVON? S FINANCIAL specification IN MID-19885PURPOSE OF THE EXCHANGE OFFER6EVALUATION OF THE TRADE-OFF7REFERENCES10INTRODUCTIONA blind drunk?s decisions astir(predicate) dividends be lots mixed up with other funding and investment decisions. rough firms pay low dividends because management is approbative about the firm?s future and wishes to retain loot for expansion. Other firms efficiency finance capital expenditures largely by borrowing. All the in a higher place are examples of dividend policies which can be defined more simply as the trade-off between retaining earnings on the one(a) hand and remunerative out cash and issuing upstart shares on the other. In order to under(a)stand the dividend policy we must(prenominal) understand that this phrase means antithetic things to different lot (R.A. Brealey & S.C. Myers, 2003). Avon Products, Inc. announced both a change in its business focus and a decline of its dividend in June 1988. To bring out the likely stock harm effect of the dividend reduction, Avon announced at the same time an odd exchange offer under which it would take up to 25% of its common stock. The case traces the score of Avon from 1979-88. We entrust pass sound judgment Avons efforts at diversification in the too soon 1980s, and will relate that effort to the companys dividend history. Moreover we will evaluate Avon?s operating and monetary strategies from 1979 to 1988 and the company?s financial judicial admission in mid-1988. PERFORMANCE OF AVON?S STOCK FROM 1978-1988Based on demo 4, Avon?s stock price has declined from $50.75 in 1978 to $24.125 in 1988 (decline decent to 52.5%). At the same time, S&P five hundred has increased from $96.11 in 1978 to $266.69 in 1988 (increase equal to 177.5%). This kinda woeful performance of Avon stock contradicts with the performance of the overall market. Moreover, establish on Exhibit 1, ROE decreased from 31% in 1978...! If you pauperization to get a full essay, order it on our website: OrderEssay.net

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