Which of the Following Statements Regarding the Taxation of Corporate

question 44

Multiple Choice

Which of the following statements regarding the taxation of corporate profits is true?

• A) Dividends payments are deductible in computing corporate taxable income.
• B) The tax treatment of corporate dividends creates a bias in favor of debt financing.
• C) Corporations cannot deduct interest payments in computing corporate taxable income.
• D) Corporations with high debt-to-equity ratios have less burdensome cash flow commitments and lower risk of insolvency.

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Definitions:

Acetyl CoA

A molecule that plays a key role in metabolism, serving as a substrate for the Krebs cycle and fatty acid synthesis; it links glycolysis and pyruvate oxidation with the citric acid cycle.

Phosphorylation Reactions

Chemical reactions in which a phosphate group is added to a molecule, such as a protein, altering its function.

Exergonic

Describes a chemical reaction that releases energy, typically in the form of heat, to its surroundings.

Hydrolysis

A process where a molecule's bond is severed by incorporating water.