Which of the Following Is True Concerning Dividends

question 7

Multiple Choice

Which of the following is true concerning dividends?

• A)Dividends received from a CCPC's business income that is subject to the small business deduction are typically grossed-up to include 138% of the dividend.
• B)Dividends received from a CCPC's business income that is not subject to the small business deduction are typically grossed-up to include 117% of the dividend.
• C)Eligible dividends require a 117% gross-up.
• D)The scheme to eliminate double taxation assumes that the corporate tax rate is 27.5% when eligible dividends are grossed-up to include 138% of the dividend.

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Definitions:

Net Operating Income

The total profit of a company after operating expenses are deducted, but before interests and taxes are subtracted.

Fixed Cost

Costs that do not change with the level of production or sales activity, such as rent or salaries.

Segment Margin

The amount of profit or loss produced by a particular segment of a business, considering only the revenues and expenses directly attributable to that segment.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profit.