Page 225 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Payout ratio: It is the amount of earnings paid out in dividends to shareholders.

Preference shares: Preference shares are those shares which fulfil both the following two

conditions: (i) They carry preferential share right in respect of dividend at a fixed rate, (ii) They

also carry preferential right in regard to payment of capital on winding up of the company.
9.7 Review Questions

1. Write short note on fi nancial management.
2. What do you understand by capital structure decisions?

3. List down the factors which are to be kept in mind while deciding the capital structure of
an organisation.

4. Comment on the statement, “For the real growth of the company the financial manager of

the company should plan an optimum capital for the company”.
5. Mention the guidelines for planning capital structure of an organisation.
6. How is capital structure decision of a fi rm influenced by tax planning?

7. Describe the dividend policy and mention its determinants.
8. Write a short note on tax implications on dividend policy.

9. Explain, in detail, the special provisions relating to tax on distribution of profits by domestic

companies.
10. What are bonus shares?
11. Describe the advantages of issuing bonus shares to firms and shareholders.

12. Is issue of bonus shares taxable in hands of company and shareholder? Comment
critically.

Answers: Self Assessment

1. Capital Structure 2. Equity

3. Highly geared companies 4. Trading on equity
5. Interest 6. Equity

7. True 8. False
9. True 10. False
11. False 12. True

13. Government 14. 15%
15. Indian Trusts Act, 1882. 16. Special Economic Zone

17. Unit Trust of India or the Mutual Fund 18. Bonus or scrip
19. Articles of Association 20. Float and liquidity

21. Stock split 22. 12 months

220 LOVELY PROFESSIONAL UNIVERSITY