Distribution Policy and Risk Question A As investors we start to look at the ret
ID: 454083 • Letter: D
Question
Distribution Policy and Risk
Question A
As investors we start to look at the return-on-investment dollars that we are earning and as business owners we have to start to look at how distributions will take place to our shareholders in the forms of dividends and repurchases.
What is meant by the term “distribution policy” and how have dividend payouts versus stock repurchases changed over time?
Question B
With any type of business venture there is always risk involved and we have to look at capital structure decisions as we move through changing economic times.
What is a business risk?
What are some of the factors that influence a firm’s business risks as it relates to their business operations or marketplace?
Explain the difference between financial and business risks within a business structure?
Explanation / Answer
Dividend policy is concerned with financial policies regarding paying cash dividend in the present or paying an increased dividend at a later stage. The distribution policy is related to the percentage of profit the company has to pay to it's shareholder. A company will not give 100% of its profit to it's share holder. Some percentage of money which is kept as reserve and surplus, which purely intended with development of the firm.
Business risk is the possibility that a company will have lower than anticipated profits, or that it will experience a loss rather than a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, overall economic climate and government regulations