Reading: Introduction

The timing and the amount of the firms' various sources and uses of funds are at the heart of corporate finance and the corporate financial policy:

Many of the elements in this graph are discussed in great details in other modules. In particular:

• Financial Planning focuses on the firm's operating activities and investments and shows how to estimate the associated cash flows.
• Capital Structure focuses on the trade-off between debt and equity financing. 
• Financing Growth discusses the process of issuing debt and equity, also in the context of M&A deals.

This module focuses on the firm's Payout Policy. The key questions we will address are:

• How much cash should the firm return to its shareholders?
• How should the firm return cash (dividends or repurchases)?
• Does payout matter?
• Is there a systematic approach to these considerations that deserves the name "policy?"

In this introductory section, we give a brief overview of the overall relevance of corporate payouts. We also introduce the most important forms of payout: Dividends and share repurchases.