CASE STUDY

The balance sheet of XYZ Limited is given below for your information:
BALANCE SHEET OF XYZ LTD AS ON…

LIABILTIES VALUE ASSETS VALUE

S.CAPITAL 100 P&M 95

R&S 15 L&B 20
S.TOTAL 115 INVESTMENTS 35
LOAN.RED.FUND 20 OFF EQMT 20
T.LOAN 30 STOCK 35
DEBENTURES 15 S.DEBTORS 25
BANK O/D 40 CASH 10
S.CREDITORS 12
OCL 8

240 240

In addition the following information is given to you:

1. Profit After tax for the current year Rs 32 lakhs
2. Depreciation charged is 10 lakhs
3. The company had paid a dividend of 15% last year.
4. The face value of a share is Rs 100
5. The company has policy of consistently transferring a portion of free cash
flow into capial & revenue reserves.

You are called upon to make a dividend decision for the

board of management considering all the above factors.
You also have an option to declare a. A Stock dividend B.
A Cash dividend or C Both.
Explain your decision.