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Which of the following is likely to reduce 'capital growth'? Select all that apply.
Suggested Answer: B, C
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Payment of high salaries and large allowances, may, fairly obviously reduce the amount of profit which can be retained for capital growth. If money is being distributed in this way, it isn't being re-tained.
A profitable company has a choice: to pay dividends to a greater or lesser extent; or retain some of its profits to a greater or lesser extent in the form of retained capital - capital growth.
Increased sales and increased profit may result in increased capital growth, all other things being equal, depending on the firm's dividend policy.
35 comments · newest first
LI
Lilli
11 months ago
Wait, how does paying dividends reduce growth? Sounds off.
RA
Raymon
11 months ago
I think C can actually help investors, not hurt them.
WI
Willard
11 months ago
A and D should boost growth, right?
CE
Cecilia
11 months ago
High salaries (B) are a big drain on resources, for sure.
ST
Stephane
11 months ago
B definitely reduces capital growth.
CH
Cherelle
12 months ago
I’m confused about option A; increased sales usually lead to growth, right? So I’m not sure how that would reduce capital growth.
SH
Shaquana
12 months ago
I practiced a similar question where increased profits were linked to growth, so I’m leaning towards D being incorrect.
RY
Ryan
1 year ago
I’m not entirely sure, but I feel like paying dividends (option C) could also reduce capital growth since it takes money out of the company.
BR
Bronwyn
1 year ago
I remember discussing how high salaries for managers can impact overall profits, so I think option B might be a good choice.
MO
Mozell
1 year ago
Dividends are a tricky one. They do reduce the company's capital, but they also signal financial health, which could boost growth. I'll have to think that one through.
MA
Maryanne
1 year ago
Payment of high salaries and large allowances to senior managers - that one seems like it could reduce capital growth by taking away funds that could be reinvested. I'll mark that one.
AN
Anabel
1 year ago
Okay, let's see. Increased sales and increased profit seem like they would increase capital growth, not reduce it. I'll have to focus on the other options.
TH
Theron
1 year ago
Hmm, this is an interesting one. I'll need to think carefully about the relationship between capital growth and the factors mentioned.
DO
Dominque
1 year ago
I also think C) Payment of dividends could reduce capital growth because it's money being taken out of the company instead of being reinvested.
JE
Jerry
1 year ago
I agree with Douglass. When a company pays high salaries, it reduces the amount of profit that can be reinvested for growth.
DO
Douglass
1 year ago
I think B) Payment of high salaries and large allowances to senior managers would reduce capital growth.
NO
Noah
1 year ago
This is a tricky one. I'd go with B, C, and maybe D, depending on how the profits are being used.
ST
Stephanie
1 year ago
Haha, I'd say all of the above. The company might as well just burn the money in a barrel if they're going to do all that!
SH
Sherita
1 year ago
Yeah, definitely not a good strategy for capital growth.
AM
Amie
1 year ago
D) Increased profit
CH
Chara
1 year ago
C) Payment of dividends
AL
Alethea
1 year ago
A) Increased sales
FR
Freida
1 year ago
I agree, it seems like they're just wasting money.
RE
Rex
1 year ago
D) Increased profit
CY
Cyril
1 year ago
C) Payment of dividends
AL
Allene
1 year ago
B) Payment of high salaries and large allowances to senior managers
HI
Hillary
1 year ago
A) Increased sales
TI
Tijuana
1 year ago
Hmm, I think A and D could also reduce capital growth. Increased sales might mean more expenses, and higher profits could get taxed heavily.
PA
Patria
1 year ago
User 3: And higher profits could get taxed heavily.
CA
Carma
1 year ago
User 2: Yeah, increased sales might mean more expenses.
IZ
Izetta
1 year ago
User 1: I think A and D could also reduce capital growth.
WY
Wynell
1 year ago
B and C for sure. Paying out too much to the big wigs and shareholders won't leave much for the business to grow.
SA
Salome
1 year ago
C) Payment of dividends
SH
Shoshana
1 year ago
B) Payment of high salaries and large allowances to senior managers
HA
Harris
1 year ago
A) Increased sales