Corporations that do not issue financial securities such as stock or debt obligations:
will not be able to increase sales.
cannot be profitable.
generate sufficient funds to fulfill their needs.
do not face double taxation of their profits.
What do YOU think the best answer is?
they will not be profitable or able to increase sales
Nope. Private corporations that do not issue securities can be very profitable and continually increase sales. Their business makes enough money by selling their product or service that selling stock or going into debt isn't necessary.
so they generate sufficient funds to fulfill thier needs
Right!
The correct answer is: do not face double taxation of their profits.
Corporations that do not issue financial securities such as stock or debt obligations do not face the issue of double taxation of their profits. Double taxation occurs when a corporation is taxed on its profits at the corporate level and then shareholders or owners are also taxed on the dividends they receive from the company.
To arrive at this answer, we can eliminate the other options:
- "Will not be able to increase sales" is not necessarily true. Corporations can still increase sales through various means such as marketing strategies, product development, and building customer relationships.
- "Cannot be profitable" is also not necessarily true. Profitability depends on various factors like the company's business model, operational efficiency, market demand for its products or services, cost management, and so on. The absence of issuing financial securities does not inherently determine profitability.
- "Generate sufficient funds to fulfill their needs" is too broad to provide a definitive answer. Companies can generate funds through various sources like bank loans, venture capital, retained earnings, or even government grants. Not issuing financial securities is just one aspect and is not solely responsible for a company's ability to generate funds.
Therefore, the remaining option, "Do not face double taxation of their profits," is the correct answer.