Marks & Spencers Dividend Policy Essay Example | Topics and Well Written Essays - 3000 words

Marks & Spencers Dividend Policy - Essay Example This paper evaluates the different ways a firm pay out cash to its shareholders such as dividend payout, stock repurchase and new stock dividends as practiced by Marks & Spencer. The first step toward understanding dividend policy is to recognize that the phrase means different things to different people. A firm's decisions about dividends are often mixed up with other financing and investment decisions. Some firms pay low dividends because management is optimistic about the firm's future and wishes to retain earnings for expansion. In this case the dividend is a by-product of the firm's capital budgeting decision. Another firm might finance capital expenditures largely by borrowing. This releases cash for dividends. In this case the firm's dividend is a by-product of the borrowing decision. There is one possible source of the firm's investment outlays and borrowing which is an issue of stock. Thus dividend policy is defined as the trade-off between retaining earnings on the one hand and paying out cash and issuing new shares on the other. (Brealey & Myers, 2003) There are many firms that pay dividends and also issue stock from time to time. They could avoid the stock issues by paying lower dividends. Many other firms restrict dividends so that they do not have to issue shares. They could issue stock occasionally and increase the dividend. Both groups of firms are facing the dividend policy trade-off. In short, companies can hand back cash to their shareholders either by paying a dividend or by buying back their stock. (Carlson, 2001) Most companies pay a regular cash dividend each quarter, but occasionally this regular dividend is supplemented by a one-off extra or special dividend. Dividends are not always in the form of cash. Frequently companies also declare stock dividends. Both stock dividends and splits increase the number of shares, but the company's assets, profits, and total value are unaffected. The distinction between the two is technical. A stock dividend is shown in the accounts as a transfer from retained earnings to equity capital, whereas a split is shown as a reduction in the par value of each share. (DeAngelo, DeAngelo, & Skinner, Special Dividends and the Evolution of Dividend Signaling, 2000) Many companies have automatic dividend reinvestment plans (DRIPs). Often the new shares are issued at a 5 percent discount from the market price; the firm offers this sweetener because it saves the underwriting costs of a regular share issue. Sometimes 10 percent or more of total dividends will be reinvested under such plans. Sometimes companies not only allow shareholders to reinvest dividends but also allow them to buy additional shares at a discount. In some cases substantial amounts of money have been invested. (Scholes & Wolfson, 1989) There is an important difference in the taxation of dividends and stock repurchases. Dividends are taxed as ordinary income, but stockholders who sell shares back to the firm pay tax only on capital gains realized in the sale. However, the Internal Revenue Service is on the lookout for companies that disguise dividends as repurchases, and it may decide that regular or proportional repurchases should be taxed as dividend payments. (Jagannathan, Stephens, & Weisbach, 2000) Stock Repurchase There are three main ways to repurchase stock.

Finals Assignment Example | Topics and Well Written Essays - 750 words

Finals - Assignment Example Malthus identified the substance wage, with foodstuff the workers’ wages is what workers eat. Rapid increase of food crops is not possible because supply of fertile land is limited and technical improvements do not come fast enough. To Ricardo, economic rent is paid to the owner of the land for the use original and indestructible power of the soil. This rent is not the same as returns derived from improvements made on the land that result to rise of the profit rather than rents. Malthus considered higher rents for landowners as salutary thing. Ricardo believed rent to be unearned income. Landowners who have to work longer hours for the bushel of wheat, sell it at same price as farmers who own the richest delta land. Rent does not determine the prices of grain rather than grain decides the amount of the rent. Answer to question 5. Both contemporary and modern critics have very often regarded Malthus, as an eminently inconsistent writer. Not only was he accused of not reasoning well (Ricardo himself wrote for instance, His arguments are not very cogent; indeed, I am often puzzled to find any connection between the premises and conclusions of his propositions’ Ricardo’s was highly influenced by sparked spare abstraction of English economy of parliamentary debate than proposed corn laws which prohibited importation of grain until the price of domestic grain increased to a specific amount. The central conflict arose from industrialist against landowners who had expanded cultivated acreage. Corns laws had favored only a few at expense of their own capital accumulation thus higher prices meant industrialists had to pay for higher wages. Since most of landowners were parliamentary, thus Corn Law passed easily, debate on these law defined interest of various economic units (groups).Malthus lavished praise on land lords and Ricardo attached the consequences, thus legislative issues become context in economic analysis and revelation of class conflict- how national income to be distributed among landlords manufacturer and workers. Malthus argued that taxation reduces disposable income thus are left worse off. Thus, Corns laws are unfavorable. Answer to question 6. Mill turns economics into a viable philosophical area of inquiry by exploring what people really want and what economics can measure and assess. Mill’s approach to economics is based on his belief in the superiority of socialism, in which economic production would be driven by cooperatives owned by the workers. To this end, Mill argues that the laws of production may be natural laws, but the laws of distribution are created and enacted by human beings. In other words, wealth is the natural product of labor, but the distribution of wealth is determined by the decisions and the will of actual people (the elite) and is not simply part of the order of nature. Mill carries this view quite far, maintaining that human laws and institutions can and should determine how w ealth is distributed. Thus, for Mill, economics is closely tied to social philosophy and politics. Private property being assumed as a fact, we have next to enumerate the different classes of persons to whom it gives rise; whose concurrence, or at least whose permission, is necessary to production, and who are therefore able to stipulate for a share of the produce. We have to inquire, according to what laws the produce distributes itself among these classes, by the spontaneous