Finance Free Writing Blog
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,...
Since businesses are involved in
making decisions that have financial consequences, in case of any...
…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…
