Asked by anthony triguero on Jul 15, 2024
Verified
Which of the following best describes the dividend decision in terms of benefits for the stockholder?
A) Paying dividends creates a short-term benefit, while retaining earnings has the potential to be a long-term benefit.
B) Paying dividends creates a long-term benefit, while retaining earnings has the potential to be a short-term benefit.
C) Paying dividends and retaining earnings both create short-term benefits.
D) Paying dividends and retaining earnings both create long-term benefits.
E) The decision to pay dividends or retain earnings has little impact on the stockholder.
Short-Term Benefit
Refers to immediate rewards or perks provided to employees, including bonuses, sick leave, and temporary incentives.
Long-Term Benefit
Advantages or positive outcomes that accrue over an extended period, often associated with investments or strategic business decisions.
- Fathom the implications of dividend choices on shareholders and the enterprise's financial decisions.
Verified Answer
DV
Destiny VazquezJul 15, 2024
Final Answer :
A
Explanation :
Paying dividends provides a short-term benefit as it gives the stockholder cash in hand. However, retaining earnings has the potential to increase the value of the company in the long-term, which can benefit the stockholder through capital gains or higher dividends in the future. So, paying dividends creates a short-term benefit, while retaining earnings has the potential to be a long-term benefit.
Learning Objectives
- Fathom the implications of dividend choices on shareholders and the enterprise's financial decisions.
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