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If a firm has a positive level of retained earnings can a dividend be paid?
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Are interest earnings from municipal bonds tax exempt?
No, interest earnings from municipal bonds are not tax exempt at the federal or state level.
What does income level mean?
what does income level mean?
Do you pay city wages tax and local taxes?
Many States all over the country allow income taxes (which includes wages) to be imposed on the city or even more local level. Many, (actually most), do not. So it just depends on where you live & or work. Working in a city with an income tax normally subjects that income to that tax, so working in NYC but even living someplace in Connecticut, as many do, means you pay NYC tax on your earnings attributable to there. But not on your other earnings - say from a different job (or even same job but other locations) or investments, interest, etc. On the other hand, living in NYC and working someplace else, the income may be taxed by the other place, and all your income in NYC taxable there as well, with a credit (of some type) for the tax you paid already on the income to another jurisdiction.
What are Advantages of accounting for price level changes?
advantages of price level accounting
Can dependents file taxes?
Yes. The IRS has income guidelines for determining whether dependents are required to file their own tax returns. Generally, for 2008 income, dependents are required to file if single under 65 with earned income of over $5,450 ($5,700 for 2009) or if married under 65 with earned income of over $6,800 ($7,100 for 2008). Even if your income is below the level requiring you to file, you should file if income tax was withheld from your earnings in order to receive a refund of that tax.
Are dividends part of comprehensive income?
Dividends act as a debit to Retained Earnings. Net Income is closed out by Crediting a gain to Retained Earnings which is a permenant equity account. Therefore Dividends are not a reduction to Net Income but instead a reduction of Retained Earnings and further of Owners Equity. As you may note, this also means that since Dividends are not included in Net Income they are not Tax Deductable which for many years resulted in double taxation of dividend income. Once at the corporate level and again at the personal level. Ex: In the financial statements it is going to be looking like this: Income Statement: Revenue-Expenses=Net Income Statement of Retained Earnings: Begging Retained Earning+Net Income-Dividends= Ending Retained Earnings
When setting beginning balances where does retained earnings go?
Retained earnings, at a high level, represent a component of equity. Some companies keep separate retained earnings balances (e.g., by year), so the beginning balance in any given fiscal year is $0. Many companies; however, use a single balance for retained earnings and add (subtract) recent year earnings (losses) to prior year earnings (losses) to create the next year's beginning balance.
What is dividend equalization reserve?
A distributable reserve, which is specifically set up to ensure that dividends remain stable despite, changes in earnings. If a company normally pays a dividend of 10 per cent per share, the directors might establish a dividend equalisation reserve so that this dividend level is protected against the eventuality of unprofitable years.
What is retained earnings and general reserve?
Retained Earnings are the accumulated profits and losses of a company over time (less any dividends or distributions to stockholders). At the end of each fiscal year, the income and expense accounts are zeroed out and the net profit or loss for the year is posted to Retained Earnings. So if a company made $10,000 Net Income per year for it's first three years (and paid no dividends), at the end of year three, Retained Earnings would be $30,000.
What are the 3 major theory of dividend policy?
Residual Theory of dividend policyThe essence of the residual theory of dividend policy is that the firm will only pay dividends from residual earnings, that is, from earnings left over after all suitable (positive NPV) investment opportunities have been financed. Retained earnings are the most important source for financing for most companies. A residual approach to the dividend policy, as the first claim on retained earnings will be the financing of the investment projects. With the residual dividend policy, the primary focus of the firm's management is indeed on investment, not dividends. Dividend policy becomes irrelevant, it is treated as a passive rather than an active, decision variables. The view of management in this case is that the value of firm and the wealth of its shareholders will be maximized by investing the earnings in the appropriate investment projects, rather than paying them out as dividends to shareholders. Thus managers will actively seek out, and invest the firm's earnings in, all acceptable (in terms of risk and return) investment projects, which are expected to increase the value of the firm. Dividends will only be paid when retained earnings exceed the funds required to finance the suitable investment projects. Conversely when the total investment funds required exceed retained earnings, no dividend will be paid.Motive for a residual policyThe motives for a residual policy, or high retentions, dividend policy commonly include:A high retention policy reduces the need to raise fresh capital, (debt or equity), thus saving on associated issues and floatation costs.A fresh equity issue may dilute existing ownership control. This may be avoided, if retentions are consistently high.A high retention policy may enable a company to finance a more rapid and higher rate of growth.When the effective rate of tax on dividend income is higher than the tax on capital gains, some shareholders, because of their personal tax positions, may prefer a high retention/low payout policyDividend Irrelevancy TheoryDividend irrelevancy theory asserts that a firm's dividend policy has no effect on its market value or its cost of capital. The theory of dividend irrelevancy was perhaps most elegantly argued by its chief proponents, Modigliani and Miller (usually referred to as M&M) in their seminar paper in 1961. They argued that dividend policy is a "passive residual" which is determined by a firm's need for investment funds.According to M&M's irrelevancy theory, if therefore does not matter how a firm divides its earnings between dividend payments to shareholders and internal retentions. In the M&M view the dividend decision is one over which managers need not agonies, trying to find the optimal dividend policy, because an optimal dividend policy does not exist. M&M built their dividend irrelevancy theory on a range of key assumptions, similar to those on which they based their theory of capital structure irrelevancy. For example they assumed:Perfect Capital markets, that is there are no taxes, (corporate or personal), no transaction costs on securities, investors are rational, information is symmetrical - all investors have access to the same information and share the same expectations about the firm's future as its managers.The firm's investment policy is fixed and is independent of its dividend policy.The Bird-In-The-Hand TheoryThe essence of the bird-in-the-hand theory of dividend policy (advanced by John Litner in 1962 and Myron Gordon in 1963) is that shareholders are risk-averse and prefer to receive dividend payments rather than future capital gains. Shareholders consider dividend payments to be more certain that future capital gains - thus a "bird in the hand is worth more than two in the bush".Gorden contended that the payment of current dividends "resolves investor uncertainty". Investors have a preference for a certain level of income now rather that the prospect of a higher, but less certain, income at some time in the future.The key implication, as argued by Litner and Gordon, is that because of the less risky nature dividends, shareholders and investors will discount the firm's dividend stream at a lower rate of return, "r", thus increasing the value of the firm's shares.According to the constant growth dividend valuation (or Gordon's growth) model, the value of an ordinary share, SV0 is given by:SV0 = D1/(r-g)Where the constant dividend growth rate is denoted by g, r is the investor's required rate of return, and D1, represents the next dividend payments. Thus the lower r is in relation to the value of the dividend payment D1, the greater the share's value. In the investor's view, according to Linter and Gordon, r, the return from the dividend, is less risky than the future growth rate g.M&M argued against this and referred to it as the bird-in-the-hand fallacy. In their irrelevancy model, M&M assume that the required rate of return or cost or capital, r, is independent of dividend policy. They maintain that a firm's risk (which influences the investor's required rate of return, r) is a function of its investment and financing decisions, not its dividend policy.M&M contend that investors are indifferent between dividends and capital gains - that is, they are indifferent between r and g is the dividend valuation model. The reason for this indifference, according to M&M, is that shareholders simply reinvest their dividends in share of the same or similar risk companies.Dividend Signaling TheoryIn practice, change in a firm's dividend policy can be observed to have an effect on its share price - an increase in dividend producing an increasing in share price and a reduction in dividends producing a decrease in share price. This pattern led many observers to conclude, contrary to M&M's model, that shareholders do indeed prefer dividends to future capital gains. Needless to say M&M disagreed.The change in dividend payment is to be interpreted as a signal to shareholders and investors about the future earnings prospects of the firm. Generally a rise in dividend payment is viewed as a positive signal, conveying positive information about a firm's future earning prospects resulting in an increase in share price. Conversely a reduction in dividend payment is viewed as negative signal about future earnings prospects, resulting in a decrease in share price.DIVIDEND AS A RESIDUALThere is school of thought which regards dividends as a residual payment. They believe that the dividend pay-out is a function of its financing decision. The investment opportunities should be financed by retained earnings. Thus internal accrual forms the first line of financing growth and investment. If any surplus balance is left after meeting the financing needs, such amount may be distributed to the shareholders in the form of dividends. Thus, dividend policy is in the nature of passive residual. In case the firm has no investment opportunities during a particular time period, the dividend pay-out should be 100%.A firm may smooth out the fluctuations in the payment of dividends over a period of time. The firm can establish dividend payments at a level at which the cumulative distribution over a period of time corresponds to cumulative residual funds over the same period. This policy smoothens out the fluctuations of dividend pay-out due to fluctuations in investment opportunities.
What is the meaning of the term Dividend?
Dividend is a share of the after-tax profit of a company, distributed to its shareholders according to the number and class of shares held by them. Smaller companies typically distribute dividends at the end of an accounting year, whereas larger, publicly held companies usually distribute it every quarter. The amount and timing of the dividend is decided by the board of directors, who also determine whether it is paid out of current earnings or the past earnings kept as reserve. Holders of preferred stock receive dividend at a fixed rate and are paid first. Holders of ordinary shares are entitled to receive any amount of dividend, based on the level of profit and the company's need for cash for expansion or other purposes. Refer to link below.
What is dividend in business?
A certain portion of the profit which is distributed to the shareholders is called a dividend. The shareholders are the owners of the corporation. _____________________________________________________________________________________ A share of the after-tax profit of a company, distributed to its shareholders according to the number and class of shares held by them. Smaller companies typically distribute dividends at the end of an accounting year, whereas larger, publicly held companies usually distribute it every quarter. The amount and timing of the dividend is decided by the board of directors, who also determine whether it is paid out of current earnings or the past earnings kept as reserve. Holders of preferred stock receive dividend at a fixed rate and are paid first. Holders of ordinary shares are entitled to receive any amount of dividend, based on the level of profit and the company's need for cash for expansion or other purposes. Refer to link below for more details.
What is real internal growth?
Real internal growth is the highest level of growth achievable for a business without obtaining outside financing. The internal growth rate for a public company can by found by taking a company's retained earnings and dividing it by total assets.
You are a business owner can you deduct your life insurance premiums as a business expense?
As a business owner you can fund the policy from the retained earnings (RE) of the buisiness for individual use or coverage. This will allow the business owner to fund the policy from a pool of money that is taxed at the business level vs his/her individual taxation level (usually highest tax bracket)
Are interest earnings from municipal bonds tax exempt?
No, interest earnings from municipal bonds are not tax exempt at the federal or state level.
What is a dividend equalisation fund?
Dividend equalisation refers to the distributable portion (non taxable) of the fund created to equalise the dividend payable on units purchased at different times. It is also revenue reserve that acts as a buffer between a certain dividend level and profits available. The sums are usually transferred to this reserve account in good years, and withdrawn from in poor years to maintain the dividend amount.
Annual earnings for a pro athlete?
The annual earnings for a pro athlete depend on the sport and the level of skill. More skill players earn more money.
