When a Firm Decides to Retain Its Earnings Instead of Paying

question 6

True/False

When a firm decides to retain its earnings instead of paying dividends,the shareholders necessarily suffer.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted for the investor's share of the investee's profits or losses.

Revaluation

The process of adjusting the book value of an asset to reflect its current fair market value.

Journal Entries

Records of financial transactions in the accounting system of a business, ensuring all financial transactions are accounted for.

Equity Method

An accounting technique used to record investments in associate companies, reflecting the investor's proportional share of the investee's net income or loss.