In general, the options available to management for the disposition of the firm's earnings are:

Question

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Retention of earnings is important for investing in business projects and ensuring future growth, while paying dividends to shareholders provides them with a direct return on their investment. By choosing both options, the firm can strike a balance between reinvestment for future growth and rewarding shareholders for their investment. Prepaying taxes for as many as ten years is not a typical option for the disposition of a firm's earnings.

In General, the Options Available to Management for the Disposition