Managerial Finance Chapter 2

If you make an extra $1,000 in income and your marginal tax rate is 30 percent while your average tax rate is 20 percent, then you will pay an extra ______ in taxes.

$300

How many tax brackets are their for forms of business other than corporations?

> 1

What does a balance sheet reflect about a firm?

Accounting value on a specific date

An increase in which one of the following will cause the operating cash flow to increase for a profitable firm?

Depreciation

Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows?

Repurchase of stock Payment of dividends Retirement of long-term debt

What is treasury stock?

Stock the firm has repurchased

What is the most important item that can be extracted from financial statements?

The firm's actual cash flows

As of 2018, the U.S. corporate tax rate is:

a flat rate of 21 percent.

Operating cash flow differs from total cash flow in that the latter makes adjustments for ____.

additions to net working capital capital spending

Net earnings refers to income earned ______.

after interest and taxes

The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors.

assets

A company's ______ tax rate is its tax bill divided by its total taxable income, and its ______ tax rate is the tax rate it pays on the next dollar of income.

average, marginal

On the balance sheet, assets are listed at their _____ value.

book

The short run is a period when there are ______ costs.

both fixed and variable

Operating cash flow is the cash flow generated by

business activities, excluding financing, capital spending, or changes in net working capital.

Operating cash flow differs from total cash flow in that the latter makes adjustments for ____.

capital spending additions to net working capital

it is difficult to manipulate

cash flows

Taxes represent which of the following:

cash outflow

The cash flow identity states that cash flow from assets equals cash flows to ____.

creditors to stockholders

Net capital spending is equal to the change in net fixed assets plus:

depreciation

Costs that do not change in the short run arise because of ______.

fixed commitments

The financial statement summarizing a firm's accounting performance over a period of time is the:

income statement

When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings.

increases

Cash flows from the acquisition and sale of fixed assets are located in the _______ activities section of the accounting statement of cash flows.

investing

Cash flow analysis is popular because:

it is harder to "spin" and misleadi

The cash flows from financing activities include changes in:

long-term debt common stock

When you are making a financial decision, the most relevant tax rate is the ____ rate when the tax rate schedule is progressive.

marginal

The price at which willing buyers and sellers would trade is called ______ value.

market

If the acquisition of fixed assets is $10,000,000 and the sales of fixed assets is $15,000,000, capital spending will be:

negative

The total cash flow of the firm includes ____.

operating, capital spending, and net working capital cash flows

For a growing firm, the change in net working capital is generally:

positive

In the U.S., taxes on proprietorship and partnerships follow which type of system after passage of the Tax Cuts and Jobs Act of 2017?

progressive tax

Who owns treasury stock?

the issuer of the stock

Dividends per share (DPS) equals dividends divided by:

total number of shares

Liquidity is:

valuable to a firm even though liquid assets tend to be less profitable to own.