A Deferral Principle Specifies That Parent Companies Are Not Taxed

question 35

Multiple Choice

A deferral principle specifies that parent companies are not taxed on foreign source income until

• A) the subsidiary providing income makes some profit.
• B) they actually receive a dividend.
• C) they acquire a majority stake in the subsidiary.
• D) the subsidiary providing income is listed in the United States.

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Definitions:

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company is using its equity to create profits.

P/E Ratio

The price-to-earnings ratio, a valuation metric for assessing a company's current share price relative to its per-share earnings.

Financial Statements

Documents that report on a company's financial performance and situation, including the balance sheet, income statement, and cash flow statement.