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Barun (Querist)
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14 March 2008 The primary purpose of the firm is to pay dividend for the share holders. Therefore, irrespective of the firm’s need and desires of share holders, a firm should follow a policy of very high dividend payout – Comment

Barun

Barun (Querist)
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14 March 2008 The credit policy of a company is criticized because the bad debt losses have increased considerably and the collection period has also increased. Discuss under what conditions this criticism may not be justified

R.V.RAO

R.V.RAO (Expert)
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14 March 2008 THE PRIMARY PURPOSE OF A FIRM IS TO CARRY ON THE BUSINESS IN ORDER TO ACHIEVE THE OBJECTS SET OUT IN ITS BASIC CHARTER LIKE PARTNERSHIP DEED OR MEMORANDUM OF ASSOCIATION.
ANY COMMERCIAL ORGAIZATION AIMS FOR WORKING EFFICIENLY IN ACHIEVING THOSE OBJECTS AND EARN PROFITS TO HANDSOMELY REWARD ITS STAKE HOLDERS.
A FIRM MAY FOLLOW A CONSCIOUS POLICY OF HIGH DIVIDEND PAYOUTS IF IT SO DECIDES BUT THE WORKING MUST BE GEARED UP TO ACHIEVE THIS OBJECTIVE.
THE SECOND QUERY ON BADDEBTS:
DURING GUJARAT EARTH QUAKE AROUND THE YEAR 2000/2001,MAJOR SALES MADE IN THAT AREA COULD NOT BE REALISED BY MANY UNITS ACROSS THE COUNTRY, AS THERE WAS A GENUINE GROUND OF NATURAL CALAMITY.I KNOW VERY BIG FIMS WHO WROTE OFF CRORES OF RUPEES DUE TO NON-REALISABLE DEBTS.
IF THEY ARE INSURED IT IS A DIFFERENT STORY.
SO THE JUSTIFICATION FOR A BADDEBT CAN BE GIVEN ,IF THERE ARE CIRCUMSTANCES JUSTIFYING THE SAME AND ALSO EFFORTS WELL DOCUMENTED LIKE CORRESPONDENCE ETC.. WITH DEBTORS . OTHERWISE YOU CANNOT PROVE THE SAME AS BADDEBTS BEFORE THE ASSESSING OFFICER .
R.V.RAO

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