Which of the following statements is true concerning domestic expansion of a business?

Question

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When a corporation expands domestically, the cash funding requirements will generally be higher than for a corporate division, especially if there are start-up losses involved. This is because a corporation is a separate legal entity and will require its own resources and funding to operate. Option A is incorrect because a corporation's funding requirements will generally be higher due to the costs associated with setting up and operating the new entity. Option C is incorrect because a division is not a separate legal entity and the parent company is responsible for all of its obligations. Option D is misleading as start-up losses may be deductible for tax purposes, but this is not necessarily the main advantage of incorporating an expansion activity.

Which of the Following Statements Is True Concerning Domestic Expansion