If the firm has earnings available to common shareholders,it has two choices of what to do with these earnings: it can either ________ or ________.
A)pay dividends to the common shareholders; retain the earnings to finance future projects and investments.
B)pay dividends to the preferred shareholders; repurchase common stock.
C)pay dividends to the bondholders; retain the earnings to finance future projects and investments.
D)pay dividends to the common shareholders; pay dividends to the bondholders.

Question

Quizplus · Accepted Answer

The best choice for a firm with earnings available to common shareholders is typically to retain the earnings to finance future projects and investments. This allows the firm to continue to grow and increase its value, which should ultimately benefit the common shareholders in the long run. Paying dividends may provide short-term benefits, but may limit the firm's ability to invest in future growth opportunities.

If the Firm Has Earnings Available to Common Shareholders,it Has