Investors generally invest in tangible and financial assets. Investment in financial assets takes place by buying shares and debenture ect. When a person buys a company’s share he will be the owner of that company and will enjoy from some benefits such as dividends, rights issue, stock dividends, bonus and increase of share’s prices. At the end of each financial Period, companise will have to make two crucial decisions: What Portion of income has to be distributed to the share holders, and what portion of it needs to be invested in the company?
Therefore the important question here is: what is the relation between earnings per share, dividends and investment?
In order to answer these questions seven hypotheses have been raised and these hypotheses have led to the design of various models in order to decide a relation between earning per share, dividends and investment.
By using regession model and related soft wares , comprehensive data of companies have been gathered and analyzed during the years 1991-2001. The results proved a relation between earnings per share, dividends and investment.