Tom and Bob Are Equal Shareholders of a Profitable Company

question 2

Multiple Choice

Tom and Bob are equal shareholders of a profitable company with only active business income. The company is growing and dividend payouts are increasing. The two men have heard that 'holding corporations' might suit their needs. Which of the following would apply?

• A) The holding companies would receive the dividends from the operating company, free of tax, to be invested in ventures of Tom and Bob's separate choices.
• B) Dividends would flow from the operating company to Tom and Bob, and then to the holding corporations.
• C) Dividends received by the holding companies from the operating company must be invested in the same ventures.
• D) The establishment of holding corporations would allow Tom and Bob to access the profits of the operating company for personal expenditures without paying a second level of tax.

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Definitions:

Z-score

A statistic that tells you how many standard deviations a given value is from the mean.

Sample Mean

The average value of a sample set, calculated by summing all observations and dividing by the number of observations.

Sampling Distribution

The probability distribution of a statistic based on a large number of samples drawn from a specific population.

Sample Size

The number of individuals or observations included in a subset of a population for the purpose of statistical analysis.