Companies that anticipate high growth in their early years are likely to retain earnings to finance that growth rather than pay dividends and then borrow or issue stock to support the growth.

Question

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This statement is true. Companies that expect high growth in their early years typically reinvest their earnings back into the business to support that growth, rather than paying dividends to shareholders. This allows them to finance their expansion without taking on too much debt or diluting their ownership by issuing too much stock. Once the company has stabilized and grown to a certain level, it may then begin to pay dividends to shareholders.

Companies That Anticipate High Growth in Their Early Years Are