Investors acquire common stock because they expect a return on their investment from ______. (Select all that apply.)Multiple select question.increases in stock pricesreceiving paid-in capitaldistributions of dividendsrepurchases of treasury stock
Question
Investors acquire common stock because they expect a return on their investment from ______. (Select all that apply.)Multiple select question.increases in stock pricesreceiving paid-in capitaldistributions of dividendsrepurchases of treasury stock
Solution
Investors acquire common stock because they expect a return on their investment from:
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Increases in stock prices: When the price of the stock increases, investors can sell their shares for a profit. This is often the main way investors expect to earn a return on their investment.
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Distributions of dividends: Some companies distribute a portion of their profits to shareholders in the form of dividends. This provides an income stream for investors, in addition to any potential capital gains from selling the stock at a higher price.
Receiving paid-in capital and repurchases of treasury stock are not typically ways that investors earn a return on their investment in common stock. Paid-in capital refers to the money a company receives from selling its stock, and treasury stock repurchases are when a company buys back its own shares, which can increase the value of the remaining shares but does not directly provide a return to investors.
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