Question

All else being equal, corporations prefer payments it makes to be classified as dividends rather than business expenses. True False

Answer 1

Answer:

True

Explanation:

Payment of dividend by a corporation depicts better financial picture and stability in earnings. And like business expenses, even the dividend paid by corporations is deducted to arrive at taxable income.

While an expense merely reflects the costs incurred, dividends reflect viable financial position which attracts investments from investors and establishes public confidence.