Generally speaking, the criteria that determine whether dynamic balancing is necessary are related to Balance Sheet items. Examples of criteria that could be considered to use include:
- Ensuring that the total cash balance is always positive, or is above some minimum threshold level (either in absolute terms or as a percentage of Sales, for example).
- Ensure that equity is always positive.
- For a business that is financed with both equity and debt, ensure that the ratio between these is held constant (or within some band of variation).
- If cumulated retained profits reach a threshold, a dividend (or extra dividend) will be distributed.
- … and so on.