Because Tax Rates Are Different in Various States Within the United

question 79

Multiple Choice

Because tax rates are different in various states within the United States,companies have incentives to set transfer prices that will

• A)increase revenues in low-tax states.
• B)decrease costs in high-tax states.
• C)decrease revenues in low-tax states.
• D)None of the answers is correct.

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Definitions:

GAAP

Generally Accepted Accounting Principles, which are a common set of accounting rules and standards used in the United States for financial reporting.

Fully Diluted Earnings Per Share

A metric that calculates earnings per share assuming all dilutive securities such as options and convertibles have been converted to common stock.

GAAP

Generally Accepted Accounting Principles, which are the common set of standards and procedures companies in the U.S. must follow when preparing their financial statements.

Share-Based Compensation

A form of pay given to employees and executives that is based on the company's stock, intended to align their interests with those of the company's shareholders.