# Under what condition mm model will be like Walter model with regards to payment of dividend?

Contents

## Is the Walter model relevant to the dividend policy?

Walter’s model on dividend policy believes in the relevance concept of a dividend. According to this concept, a dividend decision of the company affects its valuation. Walter’s theory further explains this concept in a mathematical model.

## What are the assumptions of Walter’s model?

All the financing is done through the retained earnings; no external financing is used. The rate of return (r) and the cost of capital (K) remain constant irrespective of any changes in the investments. All the earnings are either retained or distributed completely among the shareholders.

## What is dividend policy compare between Walter and Gordon models?

Walter and Myron J. Gordon (see Gordon model), who believe that current cash dividends are less risky than future capital gains. Thus, they say that investors prefer those firms which pay regular dividends and such dividends affect the market price of the share.

## What are the two main theories of dividend?

Some of the major different theories of dividend in financial management are as follows: 1. Walter’s model 2. Gordon’s model 3. Modigliani and Miller’s hypothesis.

## How is dividend payout ratio calculated?

The dividend payout ratio can be calculated as the yearly dividend per share divided by the earnings per share, or equivalently, the dividends divided by net income (as shown below).

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## What factors affect dividend policy?

There are several factors which affect dividend policy, the most important of which are the following: (a) legal rules, (b) liquidity position, (c) the need to pay off debt, (d) restrictions in debt contract, (e) rate of expansion of assets, (f) profit rate, (g) stability of earnings, (h) access to capital markets, (i) …

## What factors should be considered in determining the capital structure of a company?

Factors Determining the Capital Structure

• Financial Leverage. …
• Growth and Stability of Sales. …
• Cost of Capital. …
• Cash flow Ability to Service the Debt. …
• Nature and Size of Firm. …
• Control. …
• Flexibility. …
• Requirement of Investors.

## What are the limitations of Walter’s model?

Limitations of this model: Walter’s model assumes that the firm’s investments are purely financed by retained earnings. So this model would be applicable only to all-equity firms. The assumption of r as constant is not realistic. 