Which of the following statements is false regarding the issuance of stock versus bonds to raise capital for a corporation?

Question

Quizplus · Accepted Answer

This statement is false because the declaration of dividends does not reduce the amount of a corporation's taxable income. Dividends are paid out of the corporation's after-tax profits, meaning they are distributed from the net income that remains after the corporation has already paid its income taxes. Therefore, dividends do not affect the taxable income of the corporation; instead, they are a distribution of the earnings to shareholders and may be subject to taxation on the shareholders' personal tax returns.
The other statements are true:
b. Interest accrues; whereas, dividends do not accrue. This is true because bond interest is a fixed financial obligation that accrues over time and must be paid on the agreed-upon dates, while dividends are not guaranteed and do not accumulate if not declared.
c. The payment of bond interest is a contractual requirement. This is true as bondholders are legally entitled to receive interest payments as specified in the bond indenture agreement.
d. The payment of dividends is at the discretion of the board of directors. This is true because the board of directors of a corporation decides whether to declare a dividend and how much to distribute to shareholders, based on the company's profitability, financial needs, and other strategic considerations.

Which of the Following Statements Is False Regarding the Issuance