The fact that 70% of the dividends received by a corporation is excluded from its taxable income encourages firms to use more debt financing than they would in the absence of this tax law provision.

Question

Quizplus · Accepted Answer

The exclusion of 70% of dividends from taxable income encourages firms to invest in equity rather than debt, as it makes dividend income more attractive and tax-efficient compared to interest income from debt.

The Fact That 70% of the Dividends Received by a Corporation