Firms can pay out cash to their shareholders in the following way(s):

Question

Quizplus · Accepted Answer

Firms can choose to pay out cash to their shareholders through dividends and/or share repurchases. Dividends are regular payments made to shareholders based on their ownership of a company's stock. Share repurchases, on the other hand, are when a company uses its own cash to buy back its own shares on the open market.

Both methods of returning cash to shareholders have their advantages and disadvantages. Dividends are seen as a more stable way of returning cash, as they provide shareholders with a regular income stream. Share repurchases, on the other hand, are seen as a more flexible way of returning cash, as they allow companies to adjust their payout in response to changing market conditions.

Ultimately, the choice between dividends and share repurchases will depend on a number of factors, including the company's financial situation, its growth prospects, and its shareholder base. However, in general, a combination of both dividends and share repurchases may provide the best balance of stability and flexibility in returning cash to shareholders.

Firms Can Pay Out Cash to Their Shareholders in the Following