(solution) Q#1: What are the following working capital policies? "Fat

(solution) Q#1: What are the following working capital policies? "Fat

Q#1:

What are the following working capital policies?

?Fat Cat? or Relaxed Policy

?Lean & Mean? or Restricted Policy

                                                

Q#2:

If return on equity is 5 and required rate of return on equity is 2,

  1. What dividend policy is better for the company to adopt and why?
  2. What will be the effect of this decision on share price of the firm?