Assume that company A is doing quite well and has healthy cash flow from operating activities. Its Board of Directors has decided to not pay any dividends to its shareholders for the foreseeable future. This is most likely because
A) the company wishes to reinvest its cash for future growth opportunities.
B) it would increase the company's debt to equity ratio.
C) it would reduce retained earnings.
D) because it would cause a mass selloff of the company's shares.

Question

Quizplus · Accepted Answer

A company that is doing well and has healthy cash flow but chooses not to pay dividends is likely reinvesting its earnings into the business for future growth, rather than distributing them to shareholders.

Assume That Company a Is Doing Quite Well and Has