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Case
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Reference no. 111-085-1
Published by: IBS Center for Management Research
Published in: 2011

Abstract

The case brings to the fore Microsoft’s dividend policy. Founded in 1975, the company declared cash dividends for the first time in 2003 and continued its returns to the shareholders both in the form of cash dividends and share repurchases after that. In 2010, the company decided to raise a debt in order to pay the dividends and to repurchase shares while avoiding an adverse impact on its debt rating. The case deals with the dividend behavior of Microsoft Corporation and the fact that that it was not averse to taking a debt in order to pay dividends despite having a huge cash surplus. This case is designed to enable students to: Understand the usage of cash after Profit after tax (PAT); Understand the different ways of Repurchase of Shares; Analyze which is the better way to ensure returns to a shareholder - through cash dividends or repurchase of shares, or both?; Discuss and debate the pros and cons of the dividend policy in comparison to cash dividend and repurchase. The case is meant for MBA / MS level students as part of a strategic finance management / financial management curriculum.
Location:
Size:
Large
Other setting(s):
2002-2010

About

Abstract

The case brings to the fore Microsoft’s dividend policy. Founded in 1975, the company declared cash dividends for the first time in 2003 and continued its returns to the shareholders both in the form of cash dividends and share repurchases after that. In 2010, the company decided to raise a debt in order to pay the dividends and to repurchase shares while avoiding an adverse impact on its debt rating. The case deals with the dividend behavior of Microsoft Corporation and the fact that that it was not averse to taking a debt in order to pay dividends despite having a huge cash surplus. This case is designed to enable students to: Understand the usage of cash after Profit after tax (PAT); Understand the different ways of Repurchase of Shares; Analyze which is the better way to ensure returns to a shareholder - through cash dividends or repurchase of shares, or both?; Discuss and debate the pros and cons of the dividend policy in comparison to cash dividend and repurchase. The case is meant for MBA / MS level students as part of a strategic finance management / financial management curriculum.

Settings

Location:
Size:
Large
Other setting(s):
2002-2010

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