Operating cash flow | The Investment Quadrant by The Fifth Person

Questions › Category: Investor Psychology › Operating cash flow

Gloria asked 4 years ago

Hi Victor/ Rusmin
I was reading an article on the internet on operating cash flow and the article highlighted the following flaw:
Does not account for dividends to minority shareholders, preference shares, perpetual securities. The company may have other cash outflows that result in less cash that equity investors can get access to.
In one case, the company is a conglomerate and owns only part of the subsidiary. They still have to pay out dividends to minority shareholders that are not equity holders of the company. These dividends to minority shareholders are not factored in (meaning deducted).

Qn: why does a conglomerate have to pay dividends to non equity holders?

Thanks much!

1 Answers

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Victor Chng answered 4 years ago

Hi Gloria,

To my understanding, the cash flow does include dividend payment to minority shareholder.

Some conglomerate does not own 100% of the whole subsidiary, hence when they pay dividend to shareholder, they also have to pay it to minority shareholder.