What might an investor reasonably expect from a company with excess cash and few internal investment growth opportunities?
A) The company will buy Treasury bills with all the excess cash.
B) The company will split its stock.
C) The company will declare a stock dividend.
D) The company will pay a cash dividend or repurchase some of its own shares.

Question

Quizplus · Accepted Answer

When a company has excess cash and limited growth opportunities, it is a common practice for the company to return the excess cash to shareholders in the form of dividend payments or share repurchases. This will benefit shareholders by increasing the value of their investment without requiring them to sell shares on their own. Choices A, B, and C do not necessarily provide direct benefits for shareholders.

What Might an Investor Reasonably Expect from a Company with Excess