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2.2.3.Cash Balance
Cash balance can be measured by the proxy of (DeAngelo et al., 2006):
This proxy does explicitly say that cash balance of the company is the portion
of cash and equivalents of its total assets. The more cash the firm’s currently holding,
the more it can pay as dividend.
According to Parua
& Gupta (2009), availability of cash
is
found
to be strong
determinant of dividend policy.
It should be noted that balance sheet is a ‘snapshot’ of the firm’s financial at a
point
of
time.
In
rare
occasion
may the
proxy inflated
as
a
cause
of
the
firm
still
holding cash from recent debt/equity issuance.
2.2.4.Debt to Equity Ratio
Debt
to
Equity Ratio can describe the
indebtedness or
leveraging of
the
firm.
Its function is given as:
Corporate
finance
deals
with
two
source
of
fund,
either
in
equity or
debt.
Capital
from
retained
earnings
and
stock
offerings
goes
into
equity.
Bond
issuance
and
bank
loan
goes
into
debt.
According
to
Black
(1976),
creditors
will
require
the
company to
limit the dividend
the company can pay
if
there’s debt outstanding. The
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