Q. This is according to Case: Gainesboro Machine Tools Corporation
1. In theory, to fund an increased dividend payout or stock buyback program, an organization might invest less, borrow more or issue more stock. Which of these three elements are Gainsboro's management willing to vary and which elements they would like to remain fixed as a matter of industry policy?
2. Explain how might various providers of capital, such as stockholders and creditors, react if Gainesboro repurchased its shares? Should Gainesboro do so?