"Plowback" Is a Preferred Source of Financing a Corporation Because

question 57

Multiple Choice

"Plowback" is a preferred source of financing a corporation because

• A)it is fairly easy, compared to issuing stocks.
• B)it is not subject to double taxation.
• C)selling bonds involves the high cost of money.
• D)stock markets are subject to random walks.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies by recognizing the investor's share of the investee's profits or losses.

Voting Shares

Shares that give the shareholder the right to vote on company matters, such as electing the board of directors.

Sale

A transaction between two parties where the buyer receives goods, services, or assets in exchange for money.

Consolidated Net Income

The total net income of a parent company and its subsidiaries after the elimination of inter-company transactions and distributions to minority interests.