Question

Corporate investors are responsible for deciding whether to reinvest in the firm’s operations or take the profits as a distribution.

True / False

Answer 1

False. Corporate investors are not directly responsible for deciding whether to reinvest in the firm's operations or take the profits as a distribution. It is the responsibility of the firm's management to make such decisions.

Step-by-step explanation:

False.Corporate investors, such as shareholders, are not directly responsible for deciding whether to reinvest in the firm's operations or take the profits as a distribution. Instead, it is the responsibility of the firm's management, particularly the board of directors and executive team, to make such decisions.

These decisions are often based on various factors, including the company's financial performance, growth opportunities, and shareholder expectations.

For example, if a company is experiencing strong growth and has promising investment opportunities, the management may decide to reinvest the profits back into the firm's operations to fuel further expansion.

On the other hand, if the company is generating significant profits and does not have immediate growth prospects, the management may choose to distribute the profits to shareholders in the form of dividends.