The Tanglefern Corporation has traditionally paid out 60% of its earnings in dividends. Recently some marvelous growth

Question:

The Tanglefern has traditionally paid out 60% of its earnings in dividends. Recently some marvelous growth opportunities have arisen that involve only a little risk but require a lot of cash. Most of the executive team thinks the firm should do two things to raise the cash needed to take advantage of the opportunities. They want to (1) sell more stock and (2) suspend payments for two to three years. The suspension would be accompanied by an explanation to stockholders of what was going on. You’re the company’s CFO. Prepare a response to the others’ suggestion. Do the two proposed actions taken together create a particular problem?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...