Other things equal,management should retain profits only if the company's investments within the firm are at least as attractive as the stockholders' other investment opportunities.

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This statement reflects the principle of capital budgeting, which suggests that a company should only retain earnings if it can generate a return on investment (ROI) that is at least equal to the cost of capital. Otherwise, it would be financially rational for the firm to distribute the profits to shareholders or reinvest elsewhere. Thus, management has a fiduciary duty to allocate resources in a way that maximizes shareholder value, which entails ensuring that internal investments are profitable relative to external options.

Other Things Equal,management Should Retain Profits Only If the Company's