Which of the following statements is FALSE regarding the issue of stock compared to the issue of bonds to rais?
filed in One Bytes on Nov.28, 2009
Which of the following statements is FALSE regarding the issue of stock compared to the issue of bonds to raise capital?
a. The payment of dividends is at the discretion of the board of directors.
b. The payment of interest on bonds is required by law.
c. Interest accrues, whereas dividends do not accrue.
d. The declaration of dividends reduces the amount of income tax a corporation must pay.
November 28th, 2009 on 3:56 pm
Answer D)
Dividends get paid after income tax. So, dividends do not reduce income tax. Further, the dividend beneficiary also has to pay the tax. Hence, Dividends have the drawback of "Double Taxation"
November 28th, 2009 on 3:56 pm
d. The declaration of dividends reduces the amount of income tax a corporation must pay.