If a corporation's retained earnings are expected to create future profits,the market price of the firm's stock will ________ and create a ________ for stockholders if the stock is sold.

Question

Quizplus · Accepted Answer

Retained earnings are a portion of the profits that the company decides to keep rather than distribute as dividends. If these retained earnings are expected to create future profits, it indicates that the company is investing in growth opportunities, which can increase the value of the company and its stock. Therefore, the market price of the firm's stock will increase, and stockholders can sell their shares at a higher price, creating a capital gain.

If a Corporation's Retained Earnings Are Expected to Create Future