Marginal Productivity Theory of Distribution is based on the following assumption.
i) All the factors of production are homogeneous.
ii) Factors of production can be substituted for each other.
iii) There is perfect competition both in factor and product market.
iv) There is perfect mobility of factors of production.
v) There is full employment of factors.
vi) This theory is applicable only in longrun.
vii) The entrepreneurs aim at profit maximization.
viii) There is no government intervention in fixing the price of a factor.
ix) There is no technological change.

The wages theory of Profits: According to Prof. Taussig, profits are not different from wages. Profits, are the wages of the entrepreneur for his special ability. Profits are the wages of management. The criticism against the theory is that we can speak of negative profits (losses) but we cannot speak of negative wages. Organization is a distinct factor of production. And it is different from labour.

1. Monopoly Profit
2. Windfall Profit
3. Profit as functional reward

(i) The speculative motive relates to the desire of the people to hold cash in order to take advantage of market movements.
(ii) This regarding the future changes in the price of bonds and securities in the capital market.
(iii) The amount saved for this motive depends upon the rate of interest.
(iv) M_s = f(i)
(v) This theory is the inverse relationship between liquidity preference and rate of interest.

(i) Uncertainty theory was propounded by the American Economist Frank H. Knight.
(ii) According to him, profit is the reward for "uncertainty-bearing".
(iii) He distinguishes between "insurable" and "Non - insurable" risks.
Insurable Risks:
(i) Certain risks are measurable.
(ii) Hence they are insurable.
(iii) For Example: Risk of fire, theft etc.
Non - Insurable Risks:
(i) There are some risks which are immeasurable.
(ii) For Example Market condition, technology changes etc.
(iii) Hence they are non - insurable risks.