[mubashir1070]

Day Dreaming Limited (DDL) is a century old company involved in providing awareness programs for better recreation and allied facilities to be provided to the old age community in an emerging Asian country. The company has remarkably succeeded in changing the life style of these old people in this country. Over the past 100 years, the company has always been enjoying a sound financial position. One reason of this is that despite of having huge amounts of profits; the company did not offer dividends to its shareholders accordingly and kept on concentrating its liquidity. As a result the company’s reserves have reached to an extremely larger amount relative to its paid up capital. Recently, the company’s newly hired CFO has come to the knowledge of the board of directors (BOD’s) this uneven parity. The impact of this disparity is that there is no realistic relationship between the Book Value per Share and Market Value per Share of DDL. The BOD’s has recently arranged a meeting on this issue and the CFO was asked to put his suggestions to overcome this issue. In the meeting, the Board was much worried about the company’s liquidity position in any case.
If you were the company’s CFO, what would be your suggestion in this regard? Also, point out the benefits of your given suggestion to the company’s shareholders.
Note: – You may suggest any solution affecting the paid up capital and reserves without disturbing the company’s liquidity.

[paraclete]

Day Dreaming Limited (DDL) is a century old company involved in providing awareness programs for better recreation and allied facilities to be provided to the old age community in an emerging Asian country. The company has remarkably succeeded in changing the life style of these old people in this country. Over the past 100 years, the company has always been enjoying a sound financial position. One reason of this is that despite of having huge amounts of profits; the company did not offer dividends to its shareholders accordingly and kept on concentrating its liquidity. As a result the company's reserves have reached to an extremely larger amount relative to its paid up capital. Recently, the company's newly hired CFO has come to the knowledge of the board of directors (BOD's) this uneven parity. The impact of this disparity is that there is no realistic relationship between the Book Value per Share and Market Value per Share of DDL. The BOD's has recently arranged a meeting on this issue and the CFO was asked to put his suggestions to overcome this issue. In the meeting, the Board was much worried about the company's liquidity position in any case.
If you were the company's CFO, what would be your suggestion in this regard? Also, point out the benefits of your given suggestion to the company's shareholders.
Note: – You may suggest any solution affecting the paid up capital and reserves without disturbing the company's liquidity.

A 100 year old company is like a 100 year old man you will of course have heard of a bonus issue obviously no one in the company has in 100 years, this reminds me of the bank in the film Mary Poppins