You Are a Shareholder in a Publicly Owned Corporation

question 28

Multiple Choice

You are a shareholder in a publicly owned corporation.This corporation earns $4 per share before taxes.After it has paid taxes,it will distribute the remainder of its earnings to you as a dividend.The dividend is income to you,so you will then pay taxes on these earnings.The corporate tax rate is 35% and your tax rate on dividend income is 15%.The effective tax rate on your share of the corporations earnings is closest to:

• A) 15%
• B) 35%
• C) 45%
• D) 50%

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Definitions:

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Cash Flow

The entire sum of funds moving in and out of a corporation, impacting its ability to meet short-term obligations.

Subscale

A specific subset of items within a larger scale, designed to measure a particular dimension of the main construct.

Reliability

The degree to which an assessment tool produces stable and consistent results over time.