Comment on the following: Dividend and growth are conflicting goals to each other.

Dividend is the reward of capital whereas growth is the life of the firm. Both dividend and growth are desirable but are conflicting goals to each other. Dividend policy determines what portion of earnings will be paid out to stock holders and what portion will be retained in the business to finance long-term growth. Dividend constitutes the cash flow that accrues to equity holders whereas retained earnings are one of the most significant sources of funds for financing the corporate growth. This position is quite challenging for the finance manager and necessitate the need to establish a dividend policy in the firm which will evolve a pattern of dividend payments having no adverse effects on future actions of the firm. In the light of the question, the formulation of the dividend policy poses many problems. On the one hand theory would seem to dictate that the firm should retain all funds which can be employed at a higher rate than the capitalization rate; on the other hand, stock-holders preference must be considered.