Owners of Smaller Companies Often Set Up Related Entities to Transact

question 111

Multiple Choice

Owners of smaller companies often set up related entities to transact with in order to do which of the following?

• A)hide the transaction from the shareholders.
• B)steal assets from the small company.
• C)derive tax benefits.
• D)fraudulently create a unconsolidated entity.

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Definitions:

Fixed Assets

Assets of a long-lasting nature involved in business operations, which are not anticipated to be expended or turned into cash quickly.

Current Assets

Items of value that are projected to be turned into cash, sold off, or consumed either within a year or throughout the length of the business's normal operational cycle, whichever timeframe is greater.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating its ability to meet short-term obligations.

Office Equipment

Refers to the assets purchased for use in the operation of a business, including computers, printers, and furniture.