Sources of Business Finance — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMSources of Business Finance2 Marks
Question
How does ploughing back of profit encourage speculation?
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Answer
The market price of share decreases when management pays less dividend and carries profit to reserve account. During this time. management purchases shares.
In future, management declares higher dividend and sells their shares when its market price is high. In this way management gets personal benefit.
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