The Theory And Arguments Of Dividend Policy Finance Essay

The Theory And Arguments Of Dividend Policy Finance Essay Dividend is a cash payment made by a company to its shareholders. A companys dividend decision has important implications for both its investment and financing decisions which would what money should be give to the shareholder and how much money should be kept in the firm which may be used in the later years. The dividend decision, which consider the amount of funds retained by the company and the amounts to be distributed to the shareholders, is closely linked to both investment and financing decisions. For example the company with few projects should return the unused funds to shareholder by the way of paying more dividends. A company with several suitable projects that maintains high dividends will have to fund from external sources. In the recent years, the decision what amount to retain and what amount to pay has become an important corporate decision. The Management should take into account the expectation of the shareholders and the capital market when making dividend decision. Theory of Dividend Policy Waston and Head ( 2007) state that there are two main theories of dividend policy which are as follows: Dividend Relevance Theory: Lintner (1956) and Gordon (1959) claim that dividend policy affects the value of a firm, because of shareholder prefer dividend to capital gain. The logic of their preference regarding dividend is that divided is certain but not capital gain. So, dividend policy affects the value of a company. The assumptions of Gordon findings are investors are risk averse and uncertainty augments with regard to whether dividend payments would take place in future. Dividend Irrelevance Theory: Miller and Modigliani (1961) claim that value of a firm is not influenced by its dividend policy in perfect capital market with some assumptions. The assumptions which are needed for the perfect market are as follows: There is no tax effect on dividend and capital gain There is no transaction cost All the investors are behaving rationally There is a perfect market Arguments for and against that a Higher Cash Dividend Payout Increases the Share Price Arguments in favor of the statement: Information content: Waston and Head (2007) mention that a higher cash dividend payment plays an important role to provide favorable information to the investors. Higher cash dividend indicates that the companys financial condition is strength. Reduce Conflict of Interest: Waston and Head ( 2007) states that management tries to ensure their personal benefits, whereas owners are concerned about their own interest which cause agency problem. Higher dividend payment rate decreases conflict of interest, because it indicates that agent (management) is doing all things for the wellbeing of the shareholders. Risk free: Gitman (1997) argues that higher cash dividend reduces the uncertainty of shareholders income, so it leads to increase the share price of a company. Arguments against the statement: Shortage of Cash: High cash dividend payments cause shortage of cash which lead to forgo of making investments in profitable projects and it will act as a fuel to reduce the share price rather than increase. Increase the Cost of Capital: The given company has to manage fund from the external source which is comparative expensive than retained earnings, because of paying higher cash dividend, the capability of the given firm decreases to collect fund from internal source i.e. retained earnings. Therefore, a higher payment of cash dividend increases the cost of capital and decreases the share price. Hindrance of Growth: A higher payment of cash dividend hinders growth of the firm through squeezing the investment capacity. Arguments for and against that Divided Payment is Irrelevant to Maximize the Shareholders Wealth Argument in favour of the statement Homemade Dividend: Dividend is irrelevant to the maximization of shareholders wealth, because of if the company does not pay dividend, shareholders can continue their regular income through selling some holding shares which is called homemade dividend. Profitability: The market price of share depends upon the earnings or profitability of the firm and not the dividend policy of the given firm. Arguments against the statement The Clientele Effect: There are some differences for the different types of investors which invested in the given stock of the firm. Normally, the investors such as Pensioners and Institutional investors expect regular income in order to meet their liabilities. But in case of wealthy investors, they expect capital gain rather than small regular income in the form of dividend. So, dividend payment ratio is relevant to change the share price. Information Content: Waston and Head ( 2007 ) mention that a higher cash dividend payment plays an important role to provide favorable information to the investors . Higher cash dividend indicates that the companys financial condition is strength. Reduce Conflict of Interest: Waston and Head ( 2007 ) say that management tries to ensure their personal benefits, whereas owners are concerned about their own interest which cause agency problem. Higher dividend payment rate decreases conflict of interest, because it indicates that agent (management) is doing all things for the wellbeing of the shareholders. Risk free: Gitman (2009 ) argues that higher cash dividend reduces the uncertainty of shareholders income, so it leads to increase the share price of a company. Argument for and against that Dividend payment should be avoided since it reduces Shareholders Wealth Arguments in favour of the statement Tax effect: Shareholders need to pay tax on the dividend received on the shares which decreases their net income as a result it will decrease wealth. Reduction of investment in profitable projects: Payment of dividend to the shareholders will reduce the opportunity of the firm to invest in the profitable projects. So, the firm should try to avoid the dividend payment to its shareholders and try to concentrate on its investment opportunities. Argument against the Statement Information content: Waston and Head ( 2007) mention that a higher cash dividend payment plays an important role to provide favorable information to the investors . Higher cash dividend indicates that the companys financial condition is strength. Reduce Conflict of Interest: ( 2007) mention that management tries to ensure their personal benefits, whereas owners are concerned about their own interest which cause agency problem. Higher dividend payment rate decreases conflict of interest, because it indicates that agent (management) is doing all things for the wellbeing of the shareholders. Risk free: Gitman (2009 ) argues that higher cash dividend reduces the uncertainty of shareholders income, so it leads to increase the share price of a company. Determinants of Dividend Policy: Samuels and Brayshaw (1995) and Weston, Beasely and Brigham (1996) mention that the following factors affect the dividend policy: Constraints on dividend payments : There are some constraints in the dividend payments which includes Debt contract imposes some restrictions because the interest on debt is to be paid before the dividend and it is the obligatory payment. The face that the dividend payment should not exceed the retaining earning which was mentioned in the balance sheet It is subject to the availability of the cash , because the dividend is paid only with cash. Investment Opportunities: Company which pays more dividends it will postpones the opportunity to invest in the new acceptable projects which might be selected on the basis of Net present value of the project. Alternative source of capital: When a firm want to raise a capital though either debt or equity it have to incur some cost which is known as Cost of capital. Generally, a firm which want to raise money should try to make the cost of capital low. Normally, the Equity cost of capital and cost of debt capital should be referred as external cost and the retained earnings should be mentioned as internal cost. If have retained earning almost, its cost is less when compared to the cost of external cost. If the firms has strong Retained earning it should not depend upon the profit of firm which is not predictable, and you could not restrict your investment opportunities in new projects. Ownership dilution: If the management of the company think that they should not allow any further shares by raising through equity capital or they are reluctant to dilute the ownership it should hold large amount of retaining earning or reserves. If the firm has large number amount of reserves then it need to raise capital for any future projects. Hence, the company which dont like dilution of control should hold sufficient amount of reserves or retaining earning and whenever they need they can use for the Business. Effect of dividend policy: The effect of dividend policy depend on 4 factors this includes :Shareholder desire for current future income; the perceived riskiness of dividends versus capital gains; the tax affect on the capital gain or divided which may depend upon the relevant statues and the information content of dividend. Distributable profits: The companies act stipulated that the dividend should be paid out accumulated net realized profit which includes the current profit and the previous accumulated profit. Because there is no concise definition of the word accumulated profit in the act the Committee of Accounting Bodies issued guidelines on the determination of the realized and the distributable profits and the mentioned that the profit is as per the Accounting standards and Generally accepted accounting principles i.e., Profit available for distribution should be calculated after providing accumulated loosed from the previous year. Liquidity: When the firm announces the dividend it should have sufficient cash to pay the dividend otherwise there liquidity position should be strong. Because, the company may generate more profit its does not mean that it should have it have all the profit realised in terms of cash. It may invest some funds in Projects or investment for returns. So the management should consider the liquidity before announcement of dividend. CONCLUSION The dividend policy is the crucial part of the management decision that need to be handled carefully . If they handled properly they need not to worry about the investment decision and financial decision. According to the dividend relevance theory, the dividend policy plays a vital role in hands of the investors because the wrong decision might affect the capital structure of the firm. We got from the theory that dividend give the signal effect to the investores and it has a clientele effect so we cant avoid the payment of dividend. On the other hand if we pay dividend regularly year by year it will affect the growth of the company and it will create liquidity problems. Big company like Mcdonals they avoid the dividend in the intial year and they will create a Brand name across the world and later they pay the dividend.

Case Studies in Finance Company G & H Essay

Company G deals mostly in selling books in a large retail setting, however they implement a concept that is more community-based. Company H deals in a variety of media, including books, music, and video along with electronics and other varieties of merchandise. Not only does Company H differ in merchandise variety, but it also differs from Company G in that it is internet-based only and is highly interested in further corporate acquisitions—very different from Company G’s â€Å"community store concept†. Bruner, Eades, & Schill, 2010, pp. 96-97). Since Company H has a variety of merchandise to sell, along with its interest in acquisitions; it has a significantly higher level of net fixed assets than that of Company G. Acquisitions will always increase the level of net fixed assets. Since Company G tends to implement a strategy that does not favor large acquisitions, its level is lower at a level of 7. 6 versus 24. 4 in Company H. Company H also exceeds Company G in most of the liabilities section, which automatically gives Company H a leg up in being able to take on more liabilities such as credits and loans. However, Company G comes out winning in terms of income and expenses, with a net income of 8. 5%. Company H’s net income ended at 2. 9%. This also relates to lowered percentage of SG&A expenses on Company G’s side, higher interest income, special items income, and its lower percentage of income taxes. Company G is also considered to be more liquid than Company G, with a current ratio of 1. 57 versus Company H’s 1. 49. This indicates that while Company G has more liabilities, it is better-able to pay its short-term liabilities than Company H. It is understandable why Company H keeps its liabilities slightly lower so that they do not become overwhelmed with short-terms loans and notes that it will not be able to pay back on time.

The purpose of the annual review is to reflect

The purpose of the annual review is to reflect on the past year’s endeavors, as well as to discuss and set attainable, mutually beneficial goals for the future. It should be viewed as a vehicle to share ideas and insights based on your work in the firm this past year. In your review please address the following: 1. Project Contributions: Design, Management, Client Relations, Technical, Teamwork and Profitability. I had been requested to work on a project in New Jersey, which required the renovation of the Korea Telecom office building.However, we could not accept their request due to our firm’s workload at that time. I have been making efforts at being a reliable team member by contributing my skills and knowledge in Auto CAD and other 3d program techniques to the current project and developing rapport among the team members. 2. Firm-wide Contributions: Leadership within firm, promoting firm to others, and business development. I have promoted the firm to potential inte rnational project partners and clients by giving out the firm’s brochures and my business cards to well-known and distinguished architectural firms in Korea.3. Growth: State how these contributions demonstrate growth from previous years’ performance. Even though I’ve had architecture practical experience for over 6 years in Korea, I started all over again in this firm in New York after finishing Graduate School last May 2006. 4. Improvements: How might improvements have been made – either in your performance or by the firm? When I first started working for the firm, I was confused with architectural unit and architectural drawings in terms of architectural drawing standard differentiations, which are different from the methods I was used to back in Korea.However, I got rid of those difficulties by understanding practical knowledge and learning U. S. standard architectural drawing. Now, I’m working on a construction document for the Chapin school pr oject team. 5. Goals: State your goals for next year. I definitely would like to become a more reliable and dynamic member of the architecture staff for this firm by improving my skills in practical drawing and creative drawing. I also hope to contribute to the success of this firm in becoming an internationally well-known design firm through my efforts in procuring international projects and/or partnership.

Vectors, Biology And Transmission Cycles - 1499 Words

Vectors, Biology and Transmission Cycles The dengue virus is transmitted from human to human with a few members of Aedes Stegomyia subgenus serving as vectors, the most important one being the Aedes aegypti mosquito as this mosquito represents the bulk of the vector transmissions of the virus. Ae. aegypti mosquitos originate from Africa but due to human transport, they can now be found mostly in many tropical areas around the world. These mosquitos thrive in dark, damp areas in a tropical climate as their growth is slowed in cooler climates. Ae. aegypti have a lifespan of 10 days to 3 weeks. The following is a simple chart of the life cycle of Ae. aegypti: http://www.denguevirusnet.com/life-cycle-of-aedes-aegypti.html Female Ae. aegypti†¦show more content†¦Eggs can hatch within 2 days in tropical climates or up to a week in cooler climates. Larvae are very tolerant to low nutrient sources, mainly feeding of organic particulate matter in the water. They go through 4 instars after which they turn into pupae. They do not eat during this stage and take 2 days to develop into adult mosquitos. Pathogenesis and Immunopathophysiology Once infected for the first time, the host innate defences begin to work on the dengue virus by first initiating the complement system. However, even though the complement system can inhibit the infection from many a virus, it may have either protective or pathogenic roles against the virus depending on the stage of infection and the host. Activation of the complement system initiates several antiviral mechanisms including pathogen opsonisation and/or lysis, and activation of adaptive B and T cell responses. Complement is activated through the classical, lectin and alternative pathways, depending on specific recognition molecules. The complement cascade activates mainly to prime B and T cells to get to work on damage control within the host. However, the pathological effects which come from the complement system can vary in a dengue virus infection. Later during primary infection, IgM antibodies will be produced initially in an attempt to slow down the infection and much later on IgG antibodies specific to the specific dengue virus serotype will be deployed.

Fences, By Fences By Homer - 879 Words

Fences In Fences, Wilson tells us that there is always a kind of protection between fathers and sons, but at the same time, it is also a kind of restriction. Fathers always do not know how to express their love or even not sure about their love, causing their sons to be perplexed and hesitate whether their father really loves them. the doomed love between fathers and sons is then appeared. The relationship of the main character of fences, Troy, and his son, Cory, is a typical example of this phenomenon. Troy was a member of the Negro Leagues but never got a chance to play in the Major Leagues because he got too old to play just as the Major Leagues began accepting black players. Therefore, when Cory has been recruited by a college football team, Troy definitely refuses to let him join the team. Troy is actually protecting Cory. He refuses to let Cory join the team because he doesn’t want his son to face what he faced before. He wants to prevent Cory from the disappointing real ity which he thinks that cannot be changed – the black people are not being treated fairly in sport events. However, in the perspective of Cory, he just cannot understand why Troy doesn’t encourage or support him to chase his dream. Then, he is angry with Troy. Misunderstanding is then caused, because both of them cannot understand each other well. Beside stuffs about football, Cory is also angry about Troy cheating on Rose. He even starts a fight with Troy because of that, a fight betweenShow MoreRelated`` Everything Rises With Leadership But Falls As A Tragedy 1095 Words   |  5 PagesWilson’s Fences is a complex bildungsroman tragedy full of conflicting desires, major conflicts and flaws the characters face, death of characters that results from society’s pressures ultimately causing the downfall of the protagonist and other characters. Fences contains several themes, including identity, prejudice, American dream, love and racism, and many of the cha racters in Fences represent various virtues and attributes found in everyday life. One of the main characters in Fences is TroyRead More The Immortal Heroes of Homer’s Iliad Essay1419 Words   |  6 Pagesmade on it a great vineyard heavy with clusters, lovely and in gold, but the grapes upon it were darkened and the vines themselves stood out through poles of silver. About them he made a field-ditch of dark metal, and drove all around this a fence of tin; and there was only one path to the vineyard, and along it ran the grape-bearers for the vineyard’s stripping. Young girls and young men, in all their light-hearted innocence, carried the kind, sweet fruit away in their woven basketsRead MoreCharacter Analysis of Cory in The Play Fences by August Wilson1109 Words   |  5 Pagesdreamed of playing Major League Baseball but at that time it was an impossibility because of racial dis he other primary relationship of Fences is that of Troy to his son Cory (Courtney B. Vance) - a promising 17-year-old football player being courted by a college recruiter. Troy himself was once a baseball player in the Negro Leagues - early enough to hit homers off Satchel Paige, too early to benefit from Jackie Robinsons breakthrough - and his bitter, long-ago disappointment leads him to decreeRead MoreBaseball InFences, By August Wilson1239 Words   |  5 Pagesthe 50s. As Mollie Wilson O’Reilly put it in her article â€Å"Fertile Ground: August Wilson’s ‘Fences’†: â€Å"Wilson wrote about black Americans ‘reassembling’ themselves and their communities and coping with discrimination and poverty in another decade of the twentieth century† (20). Troy is the embodiment of black American in the 50s. Myles Weber wrote, in â€Å"Rescuing the Tragic Bully in August Wilson’s ‘Fences’†, that the black theate r â€Å"should be characterized not by tragically self-destructive figuresRead MoreEssay on Art Formal Analysis601 Words   |  3 PagesArt Formal Analysis Examining the formal qualities of Homer Watson’s painting Horse and Rider In A Landscape was quite interesting. I chose to analyze this piece as apposed to the others because it was the piece I liked the least, therefore making me analyze it more closely and discover other aspects of the work, besides aesthetics. The texture of the canvas works very well with the subject matter portrayed in the painting. The grassy hill side and the leaves of the trees are especially complimentedRead MoreOctober Sky Psychology Write-Up803 Words   |  4 Pagesboy’s journey. Homer Hickam is an adolescent boy whose life has been predetermined by his father, a foreman at the coalmine, to work down in the mines but he has a different plan for his life. In October 1957, everything changes when the first artificial satellite, Sputnik goes into orbit. After he sees the satellite flying across the night’s sky, Homer becomes inspired to learn how to build rockets. With his friends, who also are destined for the mines, and the local nerd, Homer sets to do justRead MoreAnalysis Of The Movie August Sky 914 Words   |  4 Pages1957, most of the male that live in that town were miners’.Homer, who is the main character faced many challenges, to achieved his launch rocket. Homer who is also the son o f the miners supivisors named John Hickam. Homer and his friends Roy Lee and Scott O ‘Dell got together one night with some of the neighbors after the bulletin announced the Russians rocket, Sputnik 1 was on earth orbit and will be visible. At that moment when Homer saw sputnik in the sky he enjoyed the view and was inspiredRead MoreA Brief Note On The And Kinetic Energy1679 Words   |  7 Pagesancient oak tree up on the top of the mountains.† History: Coal war, was a war/ disagreement between the union and the workers and people like his Grandpa who worker in the mine before his accident. Funny thing about Sonny’s parent s marriage is that Homer really needed help to get Elsie to come down and marry him. I mean he had to ask the president, that is major pressure. Honestly I find it funny for a guy to need help to persuade his ‘love of life’ to marry him. I really feel bad for Sonny’s poppyRead MoreMovie Report On August Sky 929 Words   |  4 Pagesmost of the males that lives in that town where miners’. Homer, who is the main character faced many challenges, to achieve his launch rocket. Homer who is equally the son of the miner s supervisors named John Hickam. Homer and his friends Roy Lee and Scott O ‘Dell got together one night with some neighbors after the bulletin announced the Russians rocket. Sputnik 1 was in earth orbit is capable of being visible. At that moment, when Homer saw Sputnik in the sky, he enjoyed the view and was inspiredRead MoreRabbit Proof Fence1822 Words   |  8 Pagestechniques in the film ‘Rabbit Proof Fence’ directed by Phillip Noyce, The book cover ‘Odyssey’ by homer illustrated by Alan Baker and the poem ‘Night Ride’ by Kenneth Slessor. In ‘Rabbit Proof Fence’ directed by Phillip Noyce techniques such as, symbolism, language, lighting, camera angles and shots, imagery, music, sound and setting are used to represent the concept of journey and that ‘the journey, not the arrival matters’. The three girls in Rabbit Proof Fence, Molly, Gracie and Daisy are the

Why The United States Should Enter World War I - 1163 Words

In this paper, the topic that is going to be discussed is what pushed the United States to enter World War I, and how did its entry affect the outcome of the war. The two main reasons that caused the United States to enter the war are the Zimmerman Telegram and the issues of unrestricted submarine warfare. the following paragraphs are going to discuss these topics a little further. Many things lead up to the US involvement in WWI. Germany had declared war on Russia and France, and Great Britain had declared war on Germany. Americans were becoming angered by German attacks on our ships because we weren’t even fighting in this war. After events like these, among many others, Wilson had no choice but to enter the war. The first topic as mentioned earlier about the Zimmerman Telegram, this particular telegram, Germany asked Mexico to join the war on Germany’s side. The telegram was intercepted by the UK, and was given to the U.S. on February 24, 1917. Germany then proposed to help Mexico regain the lands that had been taken from it in the Mexican-American War of the 1840s. This was seen as a major insult and hostile action by Germany. Second, there was an issue of unrestricted submarine warfare. Early in the war, Germany had sunk both merchant and passenger ships without warning. Then later on Germany was trying to strangle the UK by sinking ships bringing supplies to the island nations. Germany then pledged to avoid sinking passenger ships and then warn merchant ships so theyShow MoreRelatedEssay about Why the United States Entered World War Two1644 Words   |  7 PagesAutonomy and Responsibility: Why the United States Entered World War II World War II was an exceptional war for the United States. The United States emerged from the war as a world superpower and protector of all other nations. There were many reasons why the United States entered World War II, however President Franklin Roosevelt was in some way directly connected to every reason. Roosevelt wanted to enter World War II as soon as it started for political and economic needs. However, the AmericanRead MoreWorld War One On The Side Of The Allies1203 Words   |  5 PagesWorld War 1 was a war that began in 1914. It consisted of many countries around the world who chose to fight for either the allied powers or the central powers. The War was fought mainly in Europe and it started with just European countries fighting. Later, more international countries started to join World War 1. The United States of America joined the war in 1917 on the side of the allies. Even though many people believed that the US should have stayed out of World War One, America j oined the WarRead MoreEssay on World War I: United States Involvement 1233 Words   |  5 Pages He Kept us Out of War (World War I Quotes). This quote was a democratic slogan stated during the election of 1916 on behalf of President Woodrow Wilson. This slogan makes an attempt to refer to the good leadership qualities and decisions that President Wilson made to keep the United States of America out of the war and that is why he should be elected again to serve as President. Though this made a valid argument to show that Wilson was smart to keep us out of war, many events took place thatRead MoreRoosevelt s Impact On The World War II Essay1115 Words   |  5 Pageshad two opportunities to involve America in World War II: Japan was at war with China, and Germany was at war with Great Britain, France and other countries. Both war zones presented plenty of opportunities to involve the American government in the war, and Roosevelt was quick to seize upon the opportunities presente d. His first opportunity came from the war in the Pacific. It was in August, 1940, that the United States broke the Japanese purple war-time code. This gave the American governmentRead MoreThe Internment Of Germans During World War II846 Words   |  4 PagesDuring World War 2 there were so many chaoses around the world. One of the most outrageous events that happened is the internment of Germans. The U.S. should have never brought up the idea of sending Germans and Americans with German background in internment camps just because they were with Germany. There were too many Germans living in the U.S., many of them were loyal to the U.S. and were against the Nazis, and they were being discriminated without providing a real reason. First of all, thereRead MoreThe Vietnam War A Long And Hard Battle1069 Words   |  5 Pages4/20/2015 The Vietnam War a long and hard fought battle that lasted from November, 1954 and ended on April 30, 1975, but the United States didn’t get involved until June of 1965. (Vietnam War Statistics) The likely collapse of the South Vietnamese army and the fear for the spread of communism is why America joined in on this war, but joining the war was extremely controversial. Many people believe that the United States involvement In the Vietnam War should never have happened. I believe that sinceRead MoreAmerica s Entrance Of The World War I1640 Words   |  7 PagesPeriod 3 19 May 2017 Former American president Woodrow Wilson said in 1917 relating to World War I,  ¨This is a war to end all wars. ¨ Although this was not the most accurate quote as World War II followed the first, World War I was one of the bloodiest wars ever fought. The war had 37 million casualties with another 19.7 million wounded. One of the events that lead to the start of the war was the assassination of Austro-Hungarian Archduke Francis Ferdinand and his wife by Serbian nationalistsRead MoreThe Reasons Behind America Joining World War I727 Words   |  3 Pagesblockade threaten our foreign interests. Thus, the United States must join the Allies in The Great War and defend our country, her interests and her allies overseas in Europe. In this paper the reader will be introduced to the pros and cons of America joining the fight against the Central Powers, and why it is essential that the country put up a strong fight against the enemy and become involved with the war. Of the advantages of America joining the world war, one of them is protecting our investmentsRead MorePresident Franklin D. Roosevelt Essay1637 Words   |  7 Pagesrights and keep them† (The Four Freedoms). Prior to the U.S. entry into World War II, the American people were reluctant of being involved with the affairs of the world. Through a turn events and the persuasive actions of President Franklin D. Roosevelt, the country was re-geared for mobilization and war against tyranny in whichever form it presented itself. The President delivered many great speeches that brought the United States to global involvement with the use of early national media and propagandaRead MoreThe Emerging Role of the US in WW I Essay985 Words   |  4 PagesUnlike World War II, the causes of World War I were more like politically complex. It all started in Europe when the continent was split into two sides. Since a lot powers were involved in mutual agreements and all the countries in the cont inent take their sides. That is why when the war did happen; they were force to support the policies. America on the other hand, is not part of any alliance to any country in Europe. America does not want any kind of participation during the war as they are more

Consumption Between Underage Youth Adults â€Myassignmenthelp.Com

Question: Discuss About The Consumption Between Underage Youth Adults? Answer: Introduction In todays world, consumption of tobacco and Alcoholic product is growing globally. These products badly affect the health of civilian. In concern to this, government considers increase in the tax rates on cigarette and alcohol. Present paper describes the incidence of different types of alcohol products and Cigarette consumption in United States. Alcoholic items and cigarette are often considered as complementary product. In United State, beer is found to be more closely related with cigarette. United State takes attempts to reduce smoking by increasing tax rate on cigarette. Apart from than cigarette is ban in the prison of Isle of Man to reduce crime rate in the state. Alcohol and Tobacco market In the Alcohol market in United State, three widely consumed drinks are Beer, Wine and Spirit. Demand for beer is ahead of Wine and Spirit market. People in America spend a considerable amount in beer retail stores. In the composition of beer, the level of alcohol is least. This is one of the reasons for having a large share in beverage market. There are microbreweries and macro breweries in the market (Siegel et al., 2015). In the beer market, there is competition among different beer brands. Wine market in United State is globally one of the largest markets. Demand for Wine is growing day by day. In addition to domestic production, a significant volume is imported to fulfill domestic demand. Previously Wine is mostly used in occasions. Now, people increase their demand for Wine. Some dominating brands in Wine market are Treasury Wine Estates, Constellation Brands, Bronco Wine Company and Gallo Wine Company (statista.com, 2017). Tobacco Market The cigarette market is quite large in USA as like the alcohol market. There are different types of cigarette available in the market. Some of these are Regular Cigarette, Cigar; a new variety is e-cigarette. US government increases tax on cigarette items (Anderson Nelgen, 2015). Therefore, to maintain sales volume, seller brings changes in selling strategies and introduces newer products. Alcohol and tobacco items both are addictive in nature. More often people consume both cigarette and alcohol at the same time. This intensifies addiction. A complementary relation exists between alcohol and cigarette. This is supported by the report published in the article. In an attempt to reduce smoking, when US government increases tax rate then obvious impact is a decrease in cigarette demand. This however also brings a reduction is beer demand (washingtonpost.com, 2017). The inverse relation between price of cigarette and beer demand indicates that the products are complementary. Impact of health warnings on cigarette packaging on beer demand Figure 1: health warning on cigarette packaging and beer market (Source: as created by the Author) Cigarette is harmful for health. Suppose the government orders to give health warning on each cigarette packet. This might impacts on cigarette purchase by reducing the demand for cigarette. Same as when tax on cigarette reduces cigarette demand as well as beer demand health warning will impact on beer demand in the same way (Subbaraman, 2016). Figure 1 above depicts the picture of beer market. The initial demand curve is DD which now shift leftward and becomes dd. The likely impact of this a decline in both price and demand in the beer market. Effect of Yeast shortage on Cigarette purchase Figure 2: effect of yeast shortage and cigarette purchase (Source: As created by Author) A supply shortage in yeast creates a supply shortage in the beer market as yeast is used in making beer. From the normal supply demand framework in the market, supply shortage lead to a price increases in beer market resulting in a decrease in demand (Fine, 2016). When beer demand reduces then purchase of cigarette will also reduce as many people smokes at times of drinking beer. Same as above the cigarette demand curve will shift inward from its original position and consequently price and quantity in the market reduced. Cigarette ban and crime rate The addiction of smoking is more common than drinking. Consuming tobacco is less costly than drinking wine or beer. The demand for any addictive has less inelasticity. People generally do not want to leave this habit. Once get addicted people even involve in crime activities to support their addiction. One way to reduce smoking and resulted crime is to increase price of cigarette by taxation. However, taxation is not very effective way to reduce crime rate. (Walters, 2013). Isle of Man designs a different strategy to reduce crime rate in the region. The strategy is to ban smoking in the prison. Once people do any crime and sent to the prison they are compelled to leave smoking. Smoking is completely ban in this prison. It is seen that the policy effectively reduces crime rate by almost 14% (dailymail.co.uk, 2017). The fear that once criminals get imprisoned they are not allowed to smoke anymore stops them to do any crime for a mere reason. Smoking is strictly prohibited in the prison building. All those who stay in the building such as inmates, guards have to give up smoking along with other convicts. The crime rate is already low in this area because of a considerably low unemployment rate. The smoking ban in prison further reduces the crime rate. Leaving any kind of addiction is not an easy task. Realizing the difficulty supplements to cigarette is provided. Proper counseling is undertaken for the convicts to help them to completely get rid of smoking. Conclusion The report presents insight of alcohol and tobacco market in United State. Increased tax on cigarette reduces cigarette purchase and reduces demand for beer. This suggests complementarily between cigarette and beer. Because of the complementary relation a health warning on cigarette package can have a impact on beer market. Similarly yeast shortage in beer market reduces cigarette purchase. Smoking ban in Isle of Man successfully reduces crime crate in this area. References Anderson, K., Nelgen, S. (2015).Global wine markets, 1961 to 2009: a statistical compendium(p. 468). University of Adelaide Press. Drop in crime on Isle of Man attributed to Europe's only non-smoking prison. (2017).Mail Online. Retrieved 14 September 2017, from https://www.dailymail.co.uk/news/article-1239209/Drop-crime-Isle-Man-attributed-Europes-non-smoking-prison.html Facts, U. (2017).Topic: Wine Market.www.statista.com. Retrieved 14 September 2017, from https://www.statista.com/topics/1541/wine-market Fine, B. (2016). Microeconomics.University of Chicago Press Economics Books. Siegel, M., Chen, K., DeJong, W., Naimi, T. S., Ostroff, J., Ross, C. S., Jernigan, D. H. (2015). Differences in alcohol brand consumption between underage youth and adultsUnited States, 2012.Substance abuse,36(1), 106-112. Subbaraman, M. S. (2016). Substitution and Complementarity of Alcohol and Cannabis: A Review of the Literature.Substance use misuse,51(11), 1399-1414. Walters, G. D. (2013).Drugs, Crime, and Their Relationships. Jones Bartlett Publishers. Want people to drink less? Make their cigarettes more expensive. (2017).Washington Post. Retrieved 14 September 2017, from https://www.washingtonpost.com/news/wonk/wp/2014/10/27/want-people-to-drink-less-make-their-cigarettes-more-expensive/?utm_term=.6a90eaa33261