Why would shareholders approve and disapprove of reinvesting profits? - ProProfs Discuss
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Why would shareholders approve and disapprove of reinvesting profits?

Reinvested profits are the most commonly used source of finance for businesses.

Asked by Jdoherty, Last updated: Apr 30, 2022

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2 Answers

Ellie_May_Doll

Ellie_May_Doll

Ellie_May_Doll
Ellie_May_Doll

Answered Feb 25, 2017

Shareholders may dislike the business to reinvest profits as their dividend payments will be reduced causing shareholders to become unhappy, which means that shareholders may sell their shares because of this. However, shareholders may approve of a business reinvesting it's profits because in the long term it will help a business grow and improve a businesses performance on a day to day basis. This means that in the long term dividend payments will potentially be improved.
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John Adney

John Adney

John Adney
John Adney

Answered Jan 17, 2017

Shareholders would aprove because they may beleive that the more money invested now will bring greater profits in the future and therefore more dividends. they would dissaprove because in the short run it means less dividend
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