Which of the Following Statements About a Not-For-Profit Firm's Sources

question 7

Multiple Choice

Which of the following statements about a not-for-profit firm's sources of capital is most correct?

• A) Fund capital is obtained by retaining earnings-if all earnings are paid out as dividends, no fund capital is created.
• B) Preferred stock is never used by not-for-profit firms.
• C) Not-for-profit firms are not allowed to raise capital by borrowing.
• D) Not-for-profit firms usually have high dividend payouts.
• E) Since not-for-profit firms are tax exempt, there is no tax advantage to debt capital.

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Definitions:

Undue Influence

A situation where an individual is persuaded or coerced in a way that disrupts their free will, often leading to unfair agreements.

Non Est Factum

A defense in contract law that allows a person to avoid liability because they were mistaken about the nature of the document signed, not merely its contents.

Unconscionable Transaction

An equitable principle allowing courts to set aside a contract in which a party in a superior bargaining position took advantage of the other party and the consideration was grossly unfair.

Undue Influence

The use of excessive pressure by a dominant party to influence the decisions or actions of another, often undermining their free will.