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                  260                               Corporate Finance                      BRILLIANT’S


                    For meeting various working capital re-     H§$nZr>H$s {d{^ÝZ d{Hª$J H¡${nQ>b Amdí¶H$VmAm| H$mo
                      quirements of the company                   nyam H$aZo Ho$ {bE
                    For redemption of old debts                 nwamZo S>oãQ²>g Ho$ [aS>råneZ Ho$ {bE
                    For  replacement of  obsolete  assets  and   nwamZo AgoQ²>g Ho$ à{VñWmnZ VWm AmYw{ZH$sH$aU Ho$
                      modernisation.                              {bE
                      The amount of retained earnings in a com-   EH$ H§$nZr ‘| [aQ>|S> A{Zª½g H$s am{e {ZåZ{b{IV
                  pany depends upon the following factors:    H$maH$m| na {Z^©a H$aVr h¡…
                    The amount of net profits is an important   ZoQ> àm°{’$Q²>g H$s am{e Am§V[aH$ ~MV H$m EH$ ‘hÎdnyU©
                      determinant of  internal savings.  Higher   {ZYm©aH$ h¡& EH$ H§$nZr Ûmam A{O©V ZoQ> àm°{’$Q> {OVZm
                      the net profit earned by a company, the
                                                                  A{YH$ hmoVm h¡ àm°{’$Q²>g H$mo ßbm°C ~¡H$ H$aZo H$s
                      greater is its capacity to plough back prof-
                                                                  BgH$s j‘Vm CVZr A{YH$ hmoVr h¡&
                      its.
                    The dividend policy of a company deter-     EH$ H§$nZr H$s {S>{dS>|S> nm°{bgr Cg gr‘m H$m {ZYm©aU
                      mines the extent to which the profits can   H$aVr h¡ {Og na àm°{’$Q²>g H$mo ì¶mnma ‘| nwZ{Z©doe Ho$
                      be retained for reinvestment in the busi-   {bE àmßV {H$¶m Om gH$Vm h¡& ¶{X EH$ H§$nZr EH$
                      ness. If a company follows a liberal and
                                                                  CXma VWm {Z¶{‘V {S>{dS>|S> nm°{bgr H$m nmbZ H$aVr
                      regular dividend policy, it may end up re-  h¡ Vmo ¶h H$‘ àm°{’$Q²>g àmßV H$a gH$Vr h¡& qH$Vw
                      taining  lesser profits.  But  if  it  follows  a
                                                                  ¶{X ¶h EH$ é{‹T>dmXr {S>{dS>|S> nm°{bgr H$m nmbZ
                      conservative  dividend  policy,  it  has  a
                      chance of building up greater internal sav-  H$aVr h¡ Vmo BgHo$ A{YH$ Am§V[aH$ ~MV ~ZmZo H$s
                      ings.                                       g§^mdZm hmoVr h¡&
                    Another factor is the rate of corporate tax   EH$>Aݶ H$maH$ H§$nZr na bJm¶o J¶o H$m°nm}aoQ> Q>¡³g
                      imposed on the company. If the rate is high,  H$s Xa h¡& ¶{X aoQ> A{YH$ h¡ Vmo BgH$s Am§V[aH$
                      then it may have lesser amount of inter-    ~MV H$s am{e H$‘ hmo gH$Vr h¡&
                      nal savings.
                    The age of a company also influences this   H§$nZr H$s Am¶w ^r Bg am{e H$mo à^m{dV H$aVr h¡&
                      amount. New  companies  are  generally      Z¶r H§$nZrO gm‘mݶV… eo¶ahmoëS>g© H$mo g§Vwï> H$aZo
                      unable to retain much profits due to their  H$s CZH$s BÀN>m Ho$ H$maU go A{YH$ bm^ àmßV H$aZo
                      desire to satisfy the shareholders. While   ‘| A¶mo½¶ hmoVr h¢& O~{H$ nwamZr H§$n{Z¶m± eo¶ahmoëS>g©
                      the old companies may distribute smaller
                      portion of their profits to shareholders and  H$mo CZHo$ bm^ H$m N>moQ>m ^mJ {dV[aV H$a gH$Vr h¢
                      thus retain  a  larger  amount of  internal  VWm Bg àH$ma Am§V[aH$ ~MV H$s EH$ ~‹S>r am{e
                      savings.                                    àmßV H$aVr h¢&
                    The future plans of the company regard-     AmYw{ZH$sH$aU VWm {dñVma go g§~§{YV H§$nZr H$s
                      ing modernization and expansion also af-    ^{dî¶ H$s ¶moOZmE± ^r [aQ>|S>> A{Zª½g H$s am{e H$mo
                      fects the amount of retained earnings.      à^m{dV H$aVr h¢&
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