Chapter 8, Problem 8AA

To determine

To ascertain the term that best completes each sentences.

Explanation of Solution

A company’s profits will generate dividends for its stockholders.

Because dividends are a source of cash flow to the investor, they are a significant representation of the valuation of a business. It is also important to remember that dividend stocks are less likely to reach unsustainable values. In addition to capital appreciation it offers a source of income. Plus, some investors like their dividends reinvested. When doing so, the money you earn in cash outs is immediately used to buy more stock. So, the answer is generate.

Economics Concept Introduction

Introduction: Dividends, based on the number of shares owned in the corporation, reflect the allocation of corporate profits to shareholders. Shareholders want to return money to the businesses they invest in.