Identify Which of the Following Statements Is True

question 4

Multiple Choice

Identify which of the following statements is true.

• A)A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need.
• B)A corporation accumulates earnings to fund a buy-sell agreement. Such an accumulation of earnings is a reasonable business need.
• C)A corporation's net capital gain (minus any federal income taxes paid with respect to such gain)increases the tax base for the accumulated earnings tax.
• D)All of the above are false.

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Definitions:

Marginal Revenue

The extra income a company gains by selling an additional unit of a product or service.

Average Revenue

The revenue a company receives per unit of sales, calculated by dividing total revenue by the number of units sold.

Differentiate Product

The strategy businesses use to make their products or services stand out from competitors, often through unique features or branding.

Larger Profits

An increase in the surplus remaining after total costs are deducted from total revenue, indicating greater financial success for a business.