Question

On December 31 of the current year, what did Plunkett Company do?

1) Paid dividends to shareholders
2) Issued new shares of stock
3) Purchased new equipment
4) None of the above

Answer 1

The-management-and-board-of-directors-of-a-company-decide-on-issuing-stock,-paying-dividends,-or-reinvesting-profits,-taking-into-account-strategic-financial-goals-and-shareholder-interests.-These-decisions-reflect-on-the-company's-financial-strategy-and-long-term-grow

Step-by-step explanation:

Decisions about whether a firm will issue stock, pay dividends, or reinvest profits are made by the firm's management and board of directors, with consideration of the shareholders' interests. This process is different for private and public companies. Public companies often have a larger number of shareholders and more regulation surrounding these decisions compared to private firms. The choices a company makes, whether to pay dividends, issue stock, or invest in assets like new equipment, reflect its financial strategies and outlook for growth.

Firms make such financial decisions considering their long-term plans, like purchasing new equipment which may last for years and contribute to future profitability. They can raise the necessary financial capital via several avenues: funding from investors, profits reinvestment, loans from banks or bonds, and by issuing stock. The choice among these depends on the cost of capital, potential risk, and the strategic goals of the firm.