Corporate Governance Overview

The expected rate of return required by investors for investing in a company. It represents the cost of obtaining capital from various sources like debt and equity.

A weighted average of the cost of debt and cost of equity, reflecting the proportion of each financing source in a company's capital structure.

A measure of a company's riskiness relative to the market. It indicates how much a company's stock price is expected to move in relation to the overall market.

The rate at which a company expects to earn a return on its investments to justify the cost of capital.

The cost of financing a project through debt. It takes into account the interest rate and tax deductions.

The cost of financing a project through equity. It is generally calculated as the expected rate of return desired by investors.

The relationship between the cost of capital and the potential returns from a project or investment. If returns exceed the cost of capital, the investment is considered profitable.

Using the cost of capital as a key factor in evaluating potential investments. A positive net present value (NPV), indicating returns exceeding the cost of capital, signifies a beneficial investment.

The mix of debt and equity a company uses to finance its operations and growth.

The ratio of a company's total debt to its total equity, indicating the level of financial risk the company takes on.

The financial resources a company uses for its operations and investments, categorized as debt or equity.

A company's decision-making process for allocating its capital to investments with the goal of maximizing shareholder value.

A distribution of a company's profits to its shareholders, usually paid on a per-share basis.

A company's decision to pay dividends is influenced by its profitability, cash flow, financial health, and growth prospects.

A company's dividend policy outlines key decisions like how often dividends are paid, when they are paid, and how much is paid to shareholders.

Companies may offer shareholders the option to receive dividends in cash or reinvest them in additional shares through a dividend reinvestment program (DRIP).

Mature companies with stable businesses may be more likely to issue dividends because they don't need as much cash for growth.

Growth-oriented companies in capital-intensive sectors (e.g., technology) might prefer to reinvest their earnings for future growth.

Consistency is important to investors. They prefer knowing they'll receive a consistent amount each period, rather than fluctuating amounts.

Some investors may prefer the potential for higher dividends, even if it means accepting the risk of sometimes receiving lower amounts.

A strategy to pay a steady dividend each year, regardless of earnings fluctuations. Aims for predictable payouts, appealing to investors seeking regular income.

A company pays a fixed percentage of its earnings as dividends, making payouts volatile depending on earnings performance. Offers full earnings exposure for investors.

Dividends are paid only after covering all capital expenditures and working capital needs. Prioritizes business operations and investment.

Companies choose not to pay dividends, reinvesting profits into growth opportunities like research, acquisitions, or debt reduction.

Combines elements of different dividend policies, offering flexibility and tailored payouts to suit specific company needs.

Prioritizes a stable dividend payment, even if earnings are low. Offers investors predictable income and confidence in long-term growth.

Exposes investors to full earning volatility, offering potentially higher returns but also risking dividend cuts during downturns.

Prioritizes reinvestment into the business, potentially leading to higher future growth and shareholder value through stock appreciation.

A company's plan for how and when it will pay dividends to its shareholders.

The practice of combining two companies into one, either through a merger or an acquisition.

A type of M&A where one company takes over another, becoming the new owner.

A type of M&A where two companies combine to form a new entity, rather than simply one taking over the other.

A type of acquisition where the target company doesn't want to be acquired. Often happens when the acquiring company makes a hostile takeover bid.

The process of one company offering to buy the shares of another company from its shareholders, usually at a premium to the current market price.

A merger where both companies are roughly the same size, and neither company is deemed the dominant partner.

The financial institutions or divisions that specialize in facilitating or managing mergers and acquisitions.

A framework of rules, practices, and processes that guide how a company is run and controlled.

It encompasses a broad range of aspects, including action plans, internal controls, performance measurement, and how the company communicates its activities to the public.

A board of directors plays a key role in setting the company's direction and overseeing management. Shareholders have a voice in how the company is run through voting and engagement.

Good corporate governance builds trust and transparency. It promotes long-term financial stability, attracts investors, and helps a company navigate ethical and social issues.

Transparent rules and controls, aligned interests of stakeholders, and responsible leadership are key elements of strong corporate governance.

The board of directors is directly responsible for overseeing corporate governance. Their decisions and actions impact the company's direction, operations, and value.

Effective communication of the company's governance practices builds investor confidence and demonstrates commitment to responsible business practices.

Good corporate governance can translate to higher share prices, as investors recognize the value of responsible business practices.