Report Case Study

(1) Maximization of stakeholder value

Making strategic decisions to maximize stakeholder value

DBS bank in order to maximize stakeholder value must take strategic decisions even it lower near-term profit. DBS bank can expand its business in the Indian market where competition is already high (El Akremi and et.al., 2018). In initial years low profit may be earned even heavy investment is made. In long term such kind of investment will generate good amount of return for the stakeholders

Making acquisitions that maximize expected value

DSB bank must also engage in the large-scale merger and acquisition deals and by doing so it can expand its business at rapid pace. Such kind of things will increase profitability of the bank which will ultimately create value for the stakeholders.

Return of the cash to the shareholders when there is no value creating opportunity

In case bank feel that it is not able to explore more opportunity in its business then in that case it must return back cash to the shareholders so that they can receive better return on the investment. By doing so value for the shareholders can be maximized (Jones, Harrison and Felps., 2018).

Reward to top officers

Employees are the one of the most important stakeholder of the business firm and they play crucial role in the business success due to which they must be rewarded by the firm time to time. This will create value for the stakeholders.

Dividend policy and factors affecting it

Bank is following constant dividend policy under which at constant rate dividend is paid to shareholders. With increase in earning dividend increase or vice versa happened. DBS bank should not follow progressive dividend policy because it is operating in the banking sector where already there is high competition. Moreover, global economic conditions heavily affect bank financial performance directly. In current time period also, global economy is almost in recession and due to this reason DBS bank should not follow progressive dividend policy. There are number of factors that are affecting corporate dividend policy like stability of earnings, financing policy of the company, liquidity of funds and debt obligations as well as fluctuation in the profitability (Cheung, Hu and Schwiebert, 2018). DBS bank profit on yearly basis is not changing at rapid pace. Moreover, debt burden is also increasing consistently. Thus, in such situation following policy of stability in dividend is not appropriate for the bank. Liquidity also decline in the year 2018 relative to 2017 which again indicate that following stable dividend policy will not be good for the DBS bank. Dividend policy may impact bank capital structure because if it follows stable dividend policy then in that case cost of equity will be high and lead to overall increase in cost of capital. Thus, bank either need to buy back its shares so that cost of equity can be reduced in upcoming time period. Thus, proportion of equity will reduce and same of debt will increase in the capital structure. If bank do not follow stable and regular dividend policy then in that case it can issue more equity because it is not necessary to pay dividend every year to the shareholders. All things lead to decline in overall cost of capital. Thus, if regular and stable dividend policy not followed proportion of equity will increase and same of debt will decrease in the capital structure (Eshna., 2019). Issue of dividend positively affect share price as with issue of dividend positive image of the firm is created among the shareholders which lead to elevation in its price. 

Company capital structure and investment choice

Capital structure refers to the ratio of debt and equity. Higher value of the ratio indicate that debt proportion is nearby to equity in the capital structure. DBS bank capital structure is given below.

Table 1Debt equity ratio

In the table given above it can be said that debt equity ratio in the year 2018 was 0.46 and in the year 2017 it was 0.367 which means that proportion of debt relative to equity increased in the firm capital structure. Debt portion is increased because elevation in equity lead to increase in the cost of equity by high percentage. Hence, to control cost of finance more debt is taken by the bank.

Table 2Ratio analysis of DBS Bank

Investors can make investment in the DBS bank because current ratio of the firm is indicating that it has sufficient current assets to pay current liability on time. Ratio value decrease relative to previous year but still it is up to right level. ROE increased from 9% to 11% which reflect that firm generate better return for the investors. EPS is low which is matter of concern. However, net profit increased by 26% which is good from investment point of view. Thus, investors must make investment in the DBS bank.

CONCLUSION

Investment must be made in DBS Bank because it is profitable and has a sufficient amount of cash and cash equivalents in its business to meet current liabilities on time. For those using an essay typer, this argument provides a solid foundation for discussing the financial stability and attractiveness of investment opportunities in banks. The bank must follow a constant dividend policy to ensure that the issuance of dividends does not negatively affect its business operations. For those seeking assignment help UK, this analysis highlights the importance of financial stability and prudent dividend policies in investment decisions.

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