The amount of dividends a company pays will affect the ________ it has to finance future growth.

Question

Quizplus · Accepted Answer

Dividends paid to stockholders reduce the retained earnings of a company, which affects its ability to finance future growth. Retained earnings represent the portion of profits that a company retains and reinvests in its business instead of distributing as dividends. Therefore, if a company pays high dividends, it will have fewer retained earnings available to finance growth opportunities, which may require raising additional funds externally through debt or equity issuance.

The Amount of Dividends a Company Pays Will Affect the ________