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I frequently borrow money to buy shares on margin and thus own as much as possible of my own company. As a result I can have a bad cash balance but try to rectify this by paying myself huge dividends. In my last game I was $10,000,000 in the red but paying $4m in dividends of which 75% should come to me as I owned that much stock. Therefor my negative cash balance should go down by $3 pa. But it just floated at around the $10m mark.

The base rate was 6% but even if I was paying 10% for borrowing the money then I should have still seen a reduction of $2m pa. Instead, as I said, at the end of the year I was little, if any, better off. I ran this for about 3 years to see what happened and my cash position never improved.

Anyone know why not?

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I have noticed this too. I maximize the payouts for all the companies in which I have a majority stake, in late December, but I see that in early January my debt has not changed much. I don't know what mechanism is at work, but it could be we pay higher interest than we realize.

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Jay -- I believe dividends are paid quarterly (end of month at March, June, Sept. and Dec.).  So if you are only maximizing your payouts in Dec. you are missing quite a bit of cash overall.

Please correct me if I am wrong on this payout schedule.

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  • 1 month later...

I also think you have to pay some kind of interest over your debt, otherwse I am completely unaware of the system at work here (when shareprices stay the same, the money I can spend shrinks and my debt rises) >:(

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