Explain Why Some Small Start-Up Companies Choose Not to Pay

question 21

Essay

Explain why some small start-up companies choose not to pay dividends even though they make very large profits. Why might investors still be happy with this arrangement?

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Definitions:

Assessment Value

The dollar value assigned to a property for purposes of measuring applicable taxes or insurance premiums.

Investment Company

A business structure, such as a corporation or trust, dedicated to managing the combined investments of various investors in financial markets.

Front-end Loads

Charges or fees that are paid by investors at the time of purchasing shares of a mutual fund or an investment trust.

Low-load Mutual Funds

Mutual funds that charge a lower sales load (commission) compared to typical sales charges, making them more cost-effective for investors.