Should Companies Focus More On Investing Back Into The Company Or Should They Pay Dividends First?

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Should companies focus more on investing back into the company or should they pay dividends first? Summary of a recent interesting investment management article from the press. On the 21st of October 2014 the share price of Asos went up despite profits having fallen in the past year. The reason for this fall in profit was due to the tough year the company had in the financial year 2013 to 2014. The company lost potential sales and had to pay the cost of a fire damage at its global distribution centre in Barnsley in June 2014. Additionally the company faced adverse foreign exchange rate movement in its international markets due to the pound getting stronger. This ended up to be one of the main reason in affecting the international sales which count for 60% of the group revenues. On the other hand the company made some major investments in technology and international markets so as to expand and find a competitive edge and this hasn’t paid of well yet. To make these investments over the past year the company decided at the end of the financial year 2012-2013 that it will stop paying dividends as it needed the money for these investments and it will be for the better of the company as a whole. However at the end of the financial year 2013-14 the earnings per share went down by 11% due to the fall in profits. (Flecther, 2014) The importance of Asos article. The article raises the investment management issue as to whether companies use dividends as capital for investment purposes

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