RonPaulLiberty
Rookie
- Feb 29, 2012
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I hear in the news Apple is sitting on a cash pile and that they want Apple to issue dividends but why would companies do that? How is that in their interest?
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Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
This is the right answer.
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
This is the right answer.
Well kinda. It is also not a bad idea if they are using this money to grow their business into other areas ,gain market share, or pay down debt. All of these things would increase their stock price which would make money for their investers when it is time to sell.
But just sitting on it is just stupid.
Edit: there are also other reasons for sitting on cash for a company. Sometimes it helps with their balance sheet if they have a lot of debt etc... I haven't really looked much into them, so I can't say for sure and honestly I'm not going to bother.
I hear in the news Apple is sitting on a cash pile and that they want Apple to issue dividends but why would companies do that? How is that in their interest?
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Um, no.
Companies hold cash when they can put it to better use than distributing to the shareholders, and the shareholders should be happy about that
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Um, no.
Companies hold cash when they can put it to better use than distributing to the shareholders, and the shareholders should be happy about that
Well, shareholders don't always agree with the CEO and BoD, or even with each other, as to what the best use of company money is.
I thought the 1st answer was right but the second one sounds right too.Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Um, no.
Companies hold cash when they can put it to better use than distributing to the shareholders, and the shareholders should be happy about that
I thought the 1st answer was right but the second one sounds right too.Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
Um, no.
Companies hold cash when they can put it to better use than distributing to the shareholders, and the shareholders should be happy about that
Also, aren't shareholders already profiting from the rise of the stock price? if you issue dividends, doesn't it take away opportunities for the company to increase the stock price?
Um, no.
Companies hold cash when they can put it to better use than distributing to the shareholders, and the shareholders should be happy about that
Well, shareholders don't always agree with the CEO and BoD, or even with each other, as to what the best use of company money is.
Right, agreed.
Just look at the CEO of the Federal government
Simplistic explanation:
Shareholders are the owners of the company and they invest money in the company by buying shares of the company, stock. The board of directors or the people who run the company are elected by the shareholders to make the company profitable so share prices go up and dividends are returned to the shareholders. Shareholders expect a profit just like everyone else does when they invest their money.
Companies that are holding on to large cash reserves are essentially withholding the profits they made from the investors. Not only that but with the low interest rates, that money is not making money sitting in the bank either.
I hear in the news Apple is sitting on a cash pile and that they want Apple to issue dividends but why would companies do that? How is that in their interest?
Shareholders are effectively the owners of the company, so in a way, those profits belong to them. In this way, dividends provide small and easy pay-outs to stock owners. The truth is, this can benefit not just professional stock brokers, but even everyday working people who pick the right stocks.
Corporate taxes are based on retained earnings; that is, profits from this year, that you carry forward into the following year. Since you're going to pay dividends on those earnings anyway, it makes sense to pay the dividends before taxes are taken out.