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Mark Tyndall Is Successful Entrepreneur and Operates His Company, Tynder

question 102

Essay

Mark Tyndall is successful entrepreneur and operates his company, Tynder Inc, as a private corporation.He initially invested $50,000 for the common shares three years ago, and last year the company was able to borrow $100,000 from the bank.The loan is still outstanding.Tynder Inc has just had its first profitable year, earning a net income of $75,000.Mark has only been paying himself a minimal salary and was looking forward to receiving more income in the form of dividends now that the company was profitable, but his accountant has suggested that the dividend payout ratio be limited to 25%.
Required:
A) What is a dividend payout ratio? If Mark follows the accountant's suggestion how much would the dividend be?
B) Does a company need to report net earnings to pay dividends? Explain briefly.
C) Why doesn't a company pay out all of its earnings as dividends? What factors are specific to Tynder Inc's case?
D) Why might a company not maintain a constant dividend payout ratio?
E) Explain what factors Mark should consider when determining the value of dividends to pay out.How would your answer differ if Tynder Inc was a public company?

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