Gasoline Price Inflation Corporate Finance Analysis

The contemporary issue that will be covered is on increased prices of gasoline in America. In November, it was reported that the average cost of a gallon of gas is $3.38, which is the highest price ever since 2013, this is according to the Energy Information Administration. As the prices of gasoline gets high, the inflationary pressures have also climbed. The producers in America have to be therefore cautious, because investors demand them to reduce debts and raise dividends.

Regarding the concept of creating value, one should bear in mind that the value made when selling gasoline should give a much higher return on investment than the cost of initial financing. More precisely, this value is created for the shareholders and the firm within the investment project framework (Graham. et al.). When the consumers are ready to pay, profits are generated; hence the shareholders do not pay the dividends. If the gasoline is not receiving high sales, the shareholders are forced to pay dividends. If this does not happen, the dividend costs are reduced since it is money out of business.

The other concept is on core concepts of corporate finance. The three basic principles are; investment, dividend principles, and financing. Since businesses are involved in making decisions that have financial consequences, in case of any decision involving money, that use of money is regarded as a corporate finance decision (Camilleri. 67). Concerning investments, corporate finance can be consulted when a company needs capital. If the gasoline company requires financial support in scenarios where the dividend principles require it to pay its dividends. Then, corporate finance can help to issue debts to enhance the company.

Financial investments are the other concept that we will discuss; this means that an asset that has money attached to it hopes that it will appreciate giving a higher amount of money. This can be a strategy so that if you sell it, it will go at a higher price. One of the investments is in shares (Camilleri. 67). This means that if the gasoline company invests in the shares belonging to the shareholders, and then when paying their dividends, the shareholders will not be affected. This means that there will be profits in the organization even when the consumers reduce because of the high gasoline prices.

Finally, financial ethics, in this case, would mean the behavior that shows if an action is right or wrong about business. The ethical issues that may arise include misappropriation of assets hence the need to adhere to the standards provided. The repercussion of being unethical leads to the customers\\\\\\\' loss of reputation and trust (Markmann et al. 80). This means that if the gasoline company is unethical, losses will be experienced. If this happens, the dividend policy will be violated since the company will not pay dividends. However, this can be improved by prioritizing ethical performance by maintaining honesty, integrity, truthfulness, justice, and fairness.

In conclusion, the topics on creating value, core concepts of corporate finance, financial investments, and financial ethics have a relationship with the dividend policy. A variation in any of the concepts means that the payment of the dividends will also be affected. This will, in turn, affect the shareholders who may be forced to pay for the dividends instead of the company.