Finning Tractor and Equipment Company Limited
(5 pages of text)
President and CEO of Finning Tractor, has seen the earnings of the company drop below profitable levels because of a deep recession. Several restraint measures were instigated with little apparent impact. The case takes place at the point where a decision is impending on dividend policy with issues ranging from effect on stock price to the fact that the two majority shareholders may be adverse to taking a cut in the over $1.5 million in dividend income they were receiving annually.
This case covers the usual dividend policy issues such as the effect on stock price of cutting or eliminating the dividend, sending signals to stockholders, maintaining the requirements set out by the various acts for inclusion of Finning stock in life insurance and pension portfolios, and finally, the effect on the two families represented on the Board who have significant shareholdings in the company.
This case can be used in an introductory course when the topic involves the integration of capital budgeting, financing and dividend decisions. The importance of stock price to management can also be addressed in this case. The case can be used with role playing. Asking students to assume the role of the two family members who serve on the Board and receive a very significant dollar amount of dividends each year from the company provides further insight into the problem.
Canada, Large, 1982
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