acc400r1RMFwk3 - ACC 400 Accounting for Decision Making...

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ACC 400 Accounting for Decision Making ACC/400 Week Three BUSINESS OPERATIONS Introduction I work at an organization that never pays a dividend but retains all earnings for plant expansion and growth. Are they hurting the stock price? Wouldn’t they be better off paying a divided? Why would anyone invest in a company that has never, and will not, pay any money out? After all, I am not getting any return on my money so why should I invest? The question posed above is trickier than most realize. All organizations are managed and directed under different sets of principles and goals. Many are concerned with overall profitability and maintaining stock value. Many are concerned with growth and its ability to compete in the global economy. It is not that one strategy is superior to the other, it is simply a philosophical difference in what and how to maintain, grow, and compete. With that said, a generic model to business operations is hard to describe. Take for example General Electric (GE). For many years, under the watchful eye of Jack Welch, GE strived to be top dog in all of its divisions. If after a few years (or months) it was apparent they were not able to compete at the highest level, they would sell or liquidate the division. This philosophy proved to be very profitable as GE has risen to the highest levels of the Fortune 500. Use caution though,
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acc400r1RMFwk3 - ACC 400 Accounting for Decision Making...

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