On The Basic Principles Of Income Distribution

There are two kinds of income distribution in Enterprises: generalized income distribution and narrow income distribution.

The generalized income distribution refers to the process of distributing the total income and income of the enterprise; the narrow sense of income distribution refers to the distribution of the net income of the enterprise.

The income distribution in this paper refers to the distribution of net income of enterprises.

As an important financial activity, the income distribution of enterprises should follow the following principles:

(1) the principle of distribution according to law;

(2) capital preservation principle;

(3) take into account the interests of all sides.

(4)

The principle of paying equal attention to accumulation;

(5) the principle of reciprocity between investment and income.

When determining the income distribution policy of enterprises, the influence of relevant factors should be considered.

(1) legal factors: in order to protect creditors and

The interests and laws and regulations stipulate the company's income distribution, and the company's income distribution policy must comply with the requirements of relevant laws and regulations.

The relevant requirements are mainly reflected in the following aspects: (1) capital preservation constraints; (2) solvency constraints; (3)

Constraints; (4) excess accumulated profit constraint.

(two) the company factor: when the company determines the income distribution policy, for the sake of long-term development and short-term business consideration, we need to consider the following factors: (1) cash flow; (2) investment demand; (3) financing capability; (4) liquidity of assets; (5) stability of earnings; (6) financing cost; (7) dividend policy inertia; (8) other factors.

(three) shareholder factors: shareholders' considerations in income, control rights, taxes, risks and investment opportunities will also have an impact on the income distribution policy of enterprises.

(four) debt contract and inflation

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Dividend irrelevance theory, also known as MM theory, holds that under certain assumptions, dividend policy will not have any effect on the value of the company or the price of the stock.

The stock price of a company is determined entirely by the profitability and risk combination of the investment decision of the company, and has nothing to do with the profit distribution policy of the company.

The theory is based on the complete market theory. The assumptions include: (1) the market has strong efficiency; (2) there is no income tax on any company or individual; (3) there is no financing fee (including issuing costs and various paction costs); (4) investment decisions and dividend decisions are independent of each other (dividend policy does not affect investment decisions).

Dividend related theory holds that dividend policy will affect stock prices.

The main points include the following two kinds: 1. Dividend theory: dividend theory (also known as the "bird in hand" theory) believes that the reinvestment of retained earnings to investors has greater uncertainty, and the risk of investment will increase further over time. Therefore, investors prefer cash dividends rather than earnings in the company and assume future investment risks.

2, signal pmission theory: signal pmission theory holds that under asymmetric information, companies can pmit information about the company's future profitability through dividend policy, thereby affecting the company's stock price.

Generally speaking, companies with strong future profitability are willing to distinguish themselves from those with poor earning capacity by attracting relatively more investors to attract more investors.

According to the theory of income tax difference, because of the difference of tax rate and the difference of tax time, capital gains income is more conducive to achieving the goal of maximizing profits than dividend income, and enterprises should adopt low dividend policy.

Agency theory holds that dividend policy helps to mitigate agency conflicts between managers and shareholders. Dividend policy is a constraint mechanism to coordinate agency relationship between shareholders and managers.

More cash dividends can at least have the following advantages: (1) corporate managers pay dividends to investors in the form of dividends, and the "cash flow" can be reduced accordingly, which can, to a certain extent, inhibit the excessive expansion of investment or privileged consumption by the managers, thereby protecting the interests of external investors.

(2) distributing cash dividends more often, reducing internal financing, leading companies to enter the capital market to seek external financing, so companies can often accept effective supervision of the capital market, so that the agency cost can be reduced through the supervision of the capital market.