Quail Corporation Is a C Corporation with Net Income of $500,000

question 42

True/False

Quail Corporation is a C corporation with net income of $500,000 during 2008.If Quail paid dividends of $70,000 to its shareholders,the corporation must pay tax on $430,000 of net income.Shareholders must report the $70,000 of dividends as income.

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Definitions:

Retention Ratio

The retention ratio is a financial metric that measures the proportion of a company's earnings that are not distributed as dividends to shareholders but are instead reinvested in the business.

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.

Growth Rate

Growth rate refers to the percentage increase in the size or value of something over a specific period.

Retains Earnings

Profits that a company chooses to re-invest in the business rather than distribute to shareholders.