Which of the Following Statements Is False

question 64

Multiple Choice

Which of the following statements is false?

• A) Tax rates vary by income, by jurisdiction, and by whether the stock is held in a retirement account. Because of these differences, firms may attract different groups of investors depending on their dividend policy.
• B) While many investors have a tax preference for share repurchases rather than dividends, the strength of that preference depends on the difference between the dividend tax rate and the capital gains tax rate that they face.
• C) Long-term investors are more heavily taxed on capital gains, so they would prefer dividend payments to share repurchases.
• D) One-year investors, pension funds, and other non-taxed investors have no tax preference for share repurchases over dividends; they would prefer a payout policy that most closely matches their cash needs.

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Definitions:

Flexible Budget

A flexible budget adjusts expenses based on changes in actual revenue or other activity levels, providing a more accurate comparison of budgeted versus actual performance.

Predetermined Rate

A rate established in advance to allocate certain costs, often overhead, to products or job orders based on an estimated or expected basis.

Fixed Overhead

Expenses that do not vary with the level of production or sales, such as rent, salaries of permanent staff, and insurance.

Planned Activity

Activities or tasks that have been scheduled and outlined in advance as part of a project or process planning.