Retained earnings are further investments in the firm by the firm's shareholders. How should managers invest retained earnings in the interest of the firm's shareholders?

a.They should place most of the retained earnings in cash as a precautionary balance to reduce risk.

b.They should invest in financial assets such as stocks and bonds.

c.They should invest in real assets earning higher returns than the returns available to their shareholders on investments of comparable risk in the financial market.

d.They should invest in real assets that increase the size and diversity of the firm's productive activities.