A company may elect to use retained earnings in several different ways. They can be used to issue payments to stockholders as an incentive to maintain ownership. This payment is called a dividend. Alternatively, the money can be used torepurchase stockand retire equity. Or, a company may simp...
Retained earnings are the cumulative profits a company has earned over its history that have not been distributed as dividends. As a result, a negative stockholders' equity could mean a company has incurred losses for multiple periods, so much that the existing retained earnings and any funds rec...
However, when managers of a firm utilize EM opportunistically for their self-interest rather than the benefit of stockholders, the result is detrimental to the firm. Meanwhile, when managers exercise discretion over earnings within GAAP to protect shareholders’ interests, it is regarded as ethical ...
Common stock dividends, if they exist at all, are paid after the company's obligations to all preferred stockholders have been satisfied. The lower volatility of preferred stocks may look attractive, but it cuts both ways: Preferreds aren't as sensitive to a company's losses, but they ...
once the debt is repaid, the relationship with the lender ends, and there are no further obligations. In contrast, equity investors typically expect ongoing dividends and a share of the profits, which can be more expensive in the long run. The only way to extinguish this is through share re...