Because Common Shareholders Are Entitled to the Profits That Remain

question 68

Multiple Choice

Because common shareholders are entitled to the profits that remain after all of a corporation's other obligations have been met, common shareholders are known as

• A) residual owners.
• B) temporary owners.
• C) debt owners.
• D) owners of last resort.

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Definitions:

NPV

Net Present Value; a method used in capital budgeting to assess the profitability of a project or investment by calculating the difference between the present value of cash inflows and outflows.

CCA Rate

Stands for Capital Cost Allowance rate, which is a tax deduction in Canada that represents a business's investment in certain assets depreciating over time.

Tax Rate

The Tax Rate is the percentage at which an individual or corporation is taxed by the government on its income.

EAC

Stands for Equivalent Annual Cost, a concept used in capital budgeting to represent the cost per year of owning and operating an asset over its entire lifespan.