ABSTRACT

The achievement of balanced growth depends upon the firm’s ability to match the growth in the demand for its products with the growth in its productive capacity. Corporate’ planning implies that decisions about investment are not taken independently of decisions about financing. This chapter considers the balance sheets, income and appropriation accounts, and sources and use statements of UK industrial and commercial companies, with some analysis of the variations between them. It is concerned with gearing and includes a discussion of the alternative views on the question of optimal debt financing. The chapter examines the valuation of companies in connection with merger possibilities and dividend policy. In a perfect capital market dividend policy would not matter since shareholders would be indifferent between retained earnings invested to increase the share price and dividend payments which they could invest in alternative investment schemes.