LaTisha starts a business called ValueCentral.com, the concept takes off, and the company has an IPO and goes public. The company is growing very rapidly and trying to keep up with customer demand. What type of dividend is this company likely to pay its stockholders?
A) A large dividend due to high earnings
B) An average size dividend
C) Very small or no dividend
D) All profits are to be paid as dividends.
E) As no stock is involved, dividends are irrelevant.

Question

Quizplus · Accepted Answer

When a company is growing rapidly and trying to keep up with customer demand, it typically reinvests most of its profits back into the company to fund expansion and growth. This means there is little left over for dividend payments to stockholders. Therefore, this company is likely to pay very small or no dividend.

LaTisha Starts a Business Called ValueCentral