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Mention two drawbacks of ploughing back of profits, from the shareholder’s viewpoint. - Commerce

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Question

Mention two drawbacks of ploughing back of profits, from the shareholder’s viewpoint.

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Solution

  1. Reduced Dividends: Shareholders may receive lower dividends as profits are retained instead of distributed.
  2. No Control Over Usage: Shareholders cannot directly control how the retained profits are used by the management, which may lead to inefficient use of funds.
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Chapter 3: Sources of Financial for a Join stock Company - EXERCISES [Page 79]

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C. B. Gupta Commerce Volume 2 [English] Class 12 ISC
Chapter 3 Sources of Financial for a Join stock Company
EXERCISES | Q 37. | Page 79
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