Why do Companies Pay Dividend

Imagine getting a check from a company stating that you are a part in their profits and the shares were held by your parents, every single year from the time you become an adult, who would not love such surprises every quarter of the year. As a company which makes a lot of profit can choose to do many things, one thing for sure to win the confidence and appreciate their loyalty of being associated with the company comes in form of dividend payouts.

Why does a company pay a dividend?

  • since the company makes good profits it may choose to expand its markets in new geographical areas, lease its space for rent, acquire smaller and competitive businesses or simply invest in real estate, bonds or other financial institutions, buy shares or simply keep the cash in hand and show in its financials, if the board of directors feels none of the options would work they will definitely roll over the profits as Dividend to their shareholders
  • companies which are paying dividend regularly should have a strong business model in place to get the profits every year to be distributed to the shareholders, it cannot just pay for a year and then stop, which is a sign of risk if they falter after a year of paying
  • investors are really attracted to companies which pay consistently high dividends year after year, retirees who have a fixed income rely on the quarterly dividend check from the companies they have invested a while ago
  • investors should be aware not to fall in the honey trap where company who may not be doing well financially suddenly announce the payment of dividend to attract new investors who may try to buy their stock which are priced high, though it is easy to spot such odd one out from the list of companies, investors should be wise and nor gullible to buy and hold non performing negative stocks
  • as investors the aim is to grow in terms of shares, money, dividend from the companies they have invested their hard-earned earnings, companies may not essentially pay dividend in a particular year as they may have other business plans to expand, reinvest in the business, acquire to build in and strengthen their foundations which makes the shareholders wonder and feel left out as it is not absolutely essential to pay dividends.

As companies pay a dividend, the board of directors feels it is the best way to utilize the profits of the company which was contributed initially by the shareholders, it is just the best way of returning back what the shareholders invested.

 

 

Understanding CSR Better

CSR is a very common term that most of us are familiar with and we also know that this is something related to the social working of a company in the society. Now, what exactly is this CSR? Corporate Social Responsibility, abbreviated as CSR is nothing but the initiatives and efforts taken by a company in assessing and monitoring the impact and effects of its activities and functioning on the environmental and social well-being of a company. This is also termed as corporate social citizenship wherein a company would be in a situation to spend for some short-term requirements for nothing in return in the immediate future; they also do not make this expenditure expecting something in return in the name of financial benefits from the society or the people of the society but try to promote social and environmental changes in the society.

Why CSR?

CSR is a concept that is followed by almost all the companies and firms irrespective of the field of business they are into. This is something to be considered as a core component for a company`s smooth and uninterrupted operations irrespective of the field of operations it is into. This is something that would define the relationship between the company or the firm with the people and customers of the society elaborating the offerings it has for them in the name of services. So by this, we understand that it is not just the products or the services that a company needs to offer to the customers but is also this CSR that is of utmost importance when comes to delivering services to the customers?

CSR in finance?

Now with the above explanations, you might be wondering as to how there could be a relation between the CSR concept and the financial performance of a company? What is it that impacts this finance side of the company when it adheres to follow CSR? CSR is a must for all the companies as all of us know. Now when a company is able to project that all its services offered to keep in mind the social welfare of the customers and people in the society, it would start making a good impression among them and this way it would develop a confidence in the functioning of the company in the customers. With this, the customers would start relying on the services and products of the company thereby increasing the demand for the same. Now here, this increased demand would lead to more profits

 

Risk Assessment In Business

Every business owner is aware that there are several types of risks involved in his journey. A smart businessman will know what his risks are and if he is not sure, he will at least try and assess his risks beforehand so that he knows exactly what to do. Risks can pop up at any moment and if the owner is prepared to handle these risks then it becomes easier to overcome them without suffering major losses. Here is a detailed analysis of financial risk and how it could affect a business.

Understanding Risk

Risk is a condition that comes along with a circumstance that has the potential to make the business unprofitable and inoperable for a while or more. It could also place your business in a situation where it suffers insecurities and financial losses. Therefore, it is absolutely essential to understand what type of risks your business could be prone to and be prepared to face them beforehand.

The types of risks

In the financial industry, there could be a number of risks that come unannounced and it is significant that you, as a business owner, are able to differentiate one risk from the other. The first step to identify and differentiate your risks is to make a list of the ones that are highly probable to happen. The internal risks could be marketing risks, financial risks, strategic risks, operational risks and risks related to the workforce. Once you know how to deal with the first category of risks, you will have to consider the second category that involves external factors like new rivals as competitors, altering economic conditions and environmental factors. While some risks are absolutely easy to identify, some others are not so it is important that you and your entire team is involved in the process of identification.

The function of risk assessment

As a business owner, you can never be too careful about assessing risks. This is because your business can incur huge losses if you are hit by financial risks and if you were not prepared for it. When you assess a risk, you can build your defense system so that the risks do not drain your corporate fund and you can recover faster. This can be done by assessing the risks right at the inception of the company. However, all kinds of risks cannot be assessed that early so the right way would be to be alert all through and to keep a risk management system in place.

Blockchain Technology

Blockchain technology is something that you are sure to have come across when reading about cryptocurrencies. So what is Blockchain technology? This is a decentralized ledger that records every cryptocurrency transaction. Every time a digital coin is bought or sold or in case any good is brought with the digital coin it gets recorded. This is encrypted to prevent any cybercrimes. The transaction is processed and recorded without any third party.

Is this the new age internet?

The invention is indeed genius and is the brainchild of Satoshi Nakamoto. It has definitely evolved from where it all started.

The Blockchain technology allows the digital information to get distributed but it does not get copied. The Blockchain technology creates a new form of internet. The Blockchain technology was created for Bitcoin transactions but today it is finding lots of uses in the technology.

The digital gold, Bitcoin is called so because of the reasons not unknown. The currency value jumped making people rich in a few years’ time. It is not very important to understand how the Blockchain technology works. Just by having basic knowledge you can use it to transact in Bitcoin.

Features of Blockchain

The Blockchain is the compilation of much technologies like distributed computing, PGP encryption, proofs and game theory. The main is however into the consensus. Consensus makes one responsible when using Blockchain technology and they know that their actions will be recorded. It will also reflect the state of their account as well as if any account gets affected by the transactions that are carried out.

It is important to understand these terms.

PGP encryption – This allows the individual to prove the ownership of an account whether in a system or in a secure communication

Distributed computing –This is the study of the systems where the components are basically the network computers. The actions get communicated using protocols messaging

Merkle trees – The hashes of the nodes in the tree helps the connects to get verified for the parents and for the large data structure

Game theory – The natural actions converge to create consensus and stability

Why was the Blockchain technology invented?

The reason why Blockchain technology was invested was that of the shortcomings of the traditional system of banking. Shortcomings like delay in payments were common when doing any bank transaction. The banks also acted as an intermediary and took a cut in the process. The Blockchain method allowed transactions without any middleman.

 

Why Would Digital Currency Succeed?

The world has been developing at a very fast pace. In the last few years, the technology has improved at an unbelievable speed. The changes that we see today cannot be understood by many older people. There are people who are tech savvy and are ready to embrace any technology, be it automatic cars or use of credit cards for online transactions and there are people who are apprehensive about every new tool or skill. Now with the new digital currency becoming well known and its widespread uses online, it could just be the innovation that people might embrace with an open mind.

What is a digital currency?

This is an online transaction that takes place between people or parties and is documented online. There is no exchange of physical currency of any country. The money is in the form of a registration of transaction in a digital form. There is complete transparency as the transaction is in the public domain. It is visible in the documents of all the people who access the blockchain. To explain it further, these block chains actually are the fundamental units of digital currencies. The block chains keep increasing in the size as the amount of information or currency transaction increases.

Why is it good for the society?

There are always cases of corruption and manipulation of stocks and currencies around the world. There are some stronger currencies and some are weaker ones. The prices keep fluctuating whenever the government change any scheme or launch new taxes etc. and stock prices also keep fluctuating. But all the major financial decisions are taken by some authorities and everyone has to abide by that. However, in the case of digital currencies, there is no single government that can control the issuance or transaction rate of this money.

The society, thus in case of digital currency, is not limited to one country or state. As it is the virtual world and is global in nature, everyone has an equal right to the transaction and they all pay the same price, irrespective of their location in the world. The services and products are available through online websites and paid via the digital money, which is a completely transparent transaction and cheating is not possible.

As all the people involved in the particular public domain have the same record about the currency so no one can manipulate or change the data without others knowing about it. It has complete records online and yet there is no metal or paper currency. This is another feature that makes it tamper-proof, as no one can print fake digital currency. This unique currency might evolve with time and might be the only currency in the future as it is improving day by day and becoming better.