What Is Dividend Policy and What Is a Multinational Corporation?

Business Studies Two Questions on Dividend Policy and Multinational Corporations Stockholders will usually purchase stocks with the aim of creating a return in their money. The return may be created for the stockholder in two ways; firstly, through the growth in the value of the firms stock price, which result in a profit when the share is sold, and secondly in the form of dividends which are a distribution of the profits of the firm paid out to the stock holders.

The dividend policy of a firm is the approach that they adopt towards the cash disbursements from the firm to the shareholders. The distribution policy can be considered in several contexts. The first considering may be the way in which the firm chooses to use it profits and cash. For firms that are pursuing aggressive growth strategies the policy may be to retain the profits created in the firm withy the aim of reinvesting the profits.

Likewise, when a firm faces a difficult time and a reduction in profits the dividends may be reduced to reflect the decrease and support and been seen as prudent by management in order to support the firms recovery through reinvestment. Reinvestment of profits can support growth and may reduce the need to raise money from external sources. Conversely, firms that are in established industries and are doing well may have a policy to make payments to their shareholders.

It is often need that when a firm has a dividend policy of making regular and constant payments, this can have a stabilizing impact in the stocks market price. If investors know the will be getting dividend payments, the perceived risk associated with the stock is reduced, which can reduce the potential volatility of the impact on supply and demand on market prices (Howells & Bain, 2007).

A firm may also use dividends to redress the asymmetry of information that exists between the firms' management and leadership, using dividend signally to indicate their beliefs abut the future of the firm. The use of dividend signaling appears to have increased over time. Stock repurchase schemes are where a firm repurchases their own stock, usually at the market price.

The investors who sell may gain a profit if the stick has increased, and forms may also offer a premium on the market price to encourage sales, which may increase potential profits (Howells & Bain, 2007). Many firms undertake repurchasing, but the scope and scale tends to be less. For existing shareholders a repurchase scheme may be favored as it will reduce the dilution of their investment; less shares means a greater share for the remaining investors in the firms' profits.

Question B A multinational corporation may be defined as company where there are interests, including facilities or.