Analog Berhad was incorporated in 2019 and is one of the companies with high growth potential. The current chief executive officer is a young graduate with a clear vision and very focused on managing cost and increasing revenue. This includes taking necessary actions to reduce materials and labour related costs whenever possible. The young manager is also willing to adjust selling price as per the current market condition. He was quoted as saying: I believe that the only way to sustain the business is by ensuring the highest profit at all times. For me, the accounts will show our true performance and it never lies. Therefore, my team will always try to perform towards the highest profit and will set certain target to achieve them. If we can generate high profits most of the time, the profits will actually save us in difficult times. Necessary actions must be taken, and the people will need to adjust. Recently, in the board of directors meeting, one of the directors proposed to declare cash dividends of RM1 per unit. However, some of the directors believe that it is necessary for the company to reserve some cash due to the uncertainty of the economy. Those who appose the proposal argue that during this pandemic, it is very difficult to predict the performance of the company and some clients may face difficulties to make payments that may result in a cash flow problem i. Comment on the young chief executive officer approach in managing the company. [10 marks] ii. Identify and explain the possible alternatives for Analog Berhad regarding the dividend decision. Use relevant dividend theories to support your answer. [20 marks] Analog Berhad was incorporated in 2019 and is one of the companies with high growth potential. The current chief executive officer is a young graduate with a clear vision and very focused on managing cost and increasing revenue. This includes taking necessary actions to reduce materials and labour related costs whenever possible. The young manager is also willing to adjust selling price as per the current market condition. He was quoted as saying: I believe that the only way to sustain the business is by ensuring the highest profit at all times. For me, the accounts will show our true performance and it never lies. Therefore, my team will always try to perform towards the highest profit and will set certain target to achieve them. If we can generate high profits most of the time, the profits will actually save us in difficult times. Necessary actions must be taken, and the people will need to adjust. Recently, in the board of directors meeting, one of the directors proposed to declare cash dividends of RM1 per unit. However, some of the directors believe that it is necessary for the company to reserve some cash due to the uncertainty of the economy. Those who appose the proposal argue that during this pandemic, it is very difficult to predict the performance of the company and some clients may face difficulties to make payments that may result in a cash flow problem i. Comment on the young chief executive officer approach in managing the company. [10 marks] ii. Identify and explain the possible alternatives for Analog Berhad regarding the dividend decision. Use relevant dividend theories to support your answer. [20 marks]
