In Order to Avoid Double Taxation and to Escape the Frequently

question 68

True/False

In order to avoid double taxation and to escape the frequently higher tax rate applied to capital gains,stockholders generally prefer to have corporations pay dividends rather than to retain their earnings and reinvest the money in the business.Thus,earnings should be retained only if the firm needs capital very badly and would have difficulty raising it from external sources.

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Definitions:

Value Engineering

A systematic method to improve the "value" of goods or products and services by using an examination of function.

Target Price

The price at which an investor aims to buy or sell a stock based on future price predictions.

Target Selling Price

The target selling price is the price at which a company aims to sell its product or service, taking into account production costs, desired profit margins, and market conditions.

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all expenses are deducted from gross sales.