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September 2020 Q9 (ii)

Discussion in 'SP2' started by AKS01, Apr 6, 2022.

  1. AKS01

    AKS01 Very Active Member

    Hi,

    I am just going through this paper and the mark scheme states under the Assumptions checks that we should check "what assumption has been made about dividends payable to shareholders ... are they in line with recent payments ... or do they allow for an increase."
    My understanding is that there is a large increase in the surplus... if we allowed for an increase in the dividends paid to shareholders wouldn't that reduce the surplus rather then be a factor of increasing it?

    Thanks
     
    AKS01, Apr 6, 2022
    #1
  2. Mark Willder

    Mark Willder ActEd Tutor Staff Member

    Hi

    The question is just saying that we should check whether the projection allows for an increase in dividends. Yes, you're right that increased dividends will reduce projected surplus. So if we do the check and discover that dividends are projected to be constant, then that would be a reason for the surplus to go up.

    Best wishes

    Mark
     
    Mark Willder, Apr 7, 2022
    #2

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