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If a Corporation Retains All Its Profits and Distributes None

Question 158

Multiple Choice
If a corporation retains all its profits and distributes none of the profit to owners, how can owners benefit?

If a corporation retains all its profits and distributes none of the profit to owners, how can owners benefit?


A) If the retained earnings are expected to create future profits, the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold.
B) Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments.
C) Owners will only benefit if some profits are paid out in the form of dividends.
D) Owners will benefit by changing the board of directors.

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