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

question 6

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:

Controlling Account

A general ledger account that summarizes the balances of a set of subsidiary accounts, facilitating overall management.