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Depreciation:
Correct answer(s):
- reduces both taxes and net income.
As of 2008, which one of the following statements concerning corporate income taxes is correct?
Correct answer(s):
- A firm's tax is computed on an incremental basis.
Which one of the following statements related to taxes is correct?
Correct answer(s):
- The marginal tax rate for a firm can be either higher or lower than the average tax rate.
Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.
Correct answer(s):
- The labor costs for producing a product are expensed when the product is sold.
Which one of the following costs is most apt to be a fixed cost?
Correct answer(s):
- depreciation
Which one of these is most apt to be a fixed cost?
Correct answer(s):
- office salaries
Which one of the following is true according to Generally Accepted Accounting Principles?
Correct answer(s):
- Costs of goods sold are recorded based on the matching principle.
You recently purchased a grocery store. At the time of the purchase, the store’s market value equaled its book value. The purchase included the building, the fixtures, and the inventory. Which one of the following is most apt to cause the market value of this store to be lower than the book value?
Correct answer(s):
- construction of a new restricted access highway located between the store and the surrounding residential areas
The book value of a firm is:
Correct answer(s):
- based on historical cost.
The higher the degree of financial leverage employed by a firm, the:
Correct answer(s):
- higher the probability that the firm will encounter financial distress.
Shareholders’ equity:
Correct answer(s):
- represents the residual value of a firm.
Which one of the following statements related to liquidity is correct?
Correct answer(s):
- Liquid assets are valuable to a firm.
Which one of the following represents the most liquid asset?
Correct answer(s):
- $100 of inventory that is sold today for $100 cash
Which one of the following accounts is the most liquid?
Correct answer(s):
Which one of the following statements concerning net working capital is correct?
Correct answer(s):
- Net working capital increases when inventory is sold for cash at a profit.
Which one of the following statements concerning net working capital is correct?
Correct answer(s):
- A decrease in the cash balance also decreases net working capital.
Which one of the following will increase the value of a firm’s net working capital?
Correct answer(s):
- selling inventory at a profit
Which one of the following is included in a firm’s market value but yet is excluded from the firm’s accounting value?
Correct answer(s):
- good reputation of the company
Which one of the following is classified as an intangible fixed asset?
Correct answer(s):
- trademark
Cash flow to stockholders is defined as:
Correct answer(s):
- dividend payments less net new equity raised.