Chapter 3 FINC 341
If you own more than 80% of a company's stock, then ___% of the dividends are taxable.
0
Prior to ____, many large profitable corporations paid no income tax.
1987
Ordinary corporate operating losses can be carried back _____ years and forward ___ years in order to offset taxable income.
2, 20
If you own between 20 and 80 percent of a company's stock, then ____% of the dividends are taxable.
20
If you own 20% of a companys stocks, then ___% of dividends are taxable.
30
cash
A businesses net cash flow generally differs from its accounting profit because some of the revenues and expenses were not paid in ___ during that year.
Excess Capital
APIC stands for?
After Tax Yield
ATY stands for?
Net Income
Accounting Profit = ____ _____.
Because that is the real amount you are getting off something
Accounting emphasizes the calculation of net income. Why does finance emphasize net cash flow(NCF) and operating cash flow(OCF)?
A report issued annually by a corporation to its stockholders. It contains basic financial statements as well as management's analysis of the firm's past operations and future prospects.
Annual Report
Before Tax Yield
BTY stands for?
A statement of a firm's financial position at a specific point in time
Balance Sheet
Common Stock
CS stands for?
Yes, if a company loses value, then their MVA would be negative
Can MVA ever be negative?
made when a capital asset is sold for more than its purchase price
Capital Gain
made when a capital asset is sold for less than its purchase price
Capital Loss
What are the 4 current assets?
Cash, Accounts Receivable, Market Securities, and Inventory.
Earning before interest and taxes
EBIT stands for?
Earning before interest, taxes, depreciation, and amortization
EBITDA stands for?
Earning before taxes
EBT stands for?
effectiveness
EVA focuses on a firm's managerial ____ within a specific year.
MVA
EVA is a more accurate representation of how a firm is doing rather than ____.
one
EVA is for ___ year only.
Economic Value Added
EVA stands for?
After-Tax Operating profit - After-Tax cost of capital
EVA= ______ - _______
The cash flow actually available for distribution to all investors (stockholders and debt holders) after the company has made all the investments in fixed assets, new products, and working capital necessary to sustain ongoing operations.
Free Cash Flow
3.8, 250
Healthcare Tax is ___% If you have more than ____ thousand in taxable income.
ROE
IF EVA is positive, then ___ exceeds cost of equity.
operating, EBIT
If you see ____ in a title, interest or ______ hasn't been accounted for.
earning
If you want to max stock price, you can't max _____.
Reports summarizing a firm's revenues, expenses, and profits during a reporting period, generally a quarter or a year
Income Statements
Who does the Alternative Minimum Tax affect?
Individuals and corporations
Held for one year or longer; tax rate capped 15%( except 0% capital gains for individuals in the 10% or 15% brackets, and 20% for 39.6 bracket)
Long term Capital Gain/Loss
(#shares outstanding)(Po) -(CS+APIC+R/E)
MVA = (#shares outstanding)(Po) -(CS+APIC+R/E)
Market Value Added
MVA stands for?
The difference between the market value of a firm's equity an the book value as shown on the balance sheet.
Market Value added (MVA) Def?
EBIT, T
NOPAT = ____ ( 1 - ____)
EBT(1-T) +D
Net Cash Flow = ____ (1 - _____) + _____
Current Assets - (A/P + Accruals)
Net Operating Working Capital =
Are dividends tax deductible?
No
EBIT
Operating Cash Flow = _____( 1- T) + D
money form your direct job
Ordinary income
money made from investments in real estate
Passive income
Stock price
Po stands for?
Retained Earnings
R/E stands for?
cash, dividends
Retained Earning as reported on a balance sheet do not represent ____ and are not "available" for ____ or anything else.
100, american
S corporations can't have more than _____ shareholders, and the shareholders have to be _____.
Sold within one year, taxed as ordinary income
Short-term Capital Gain/Loss
beginning balance of R/E + Net Income - Dividends Payed out to stockholders = Ending balance of R/E
Statement of Retained Earnings Equation
Consolidated Corporate Tax Returns
Tax returns can be consolidated if a corporation owns 80% or more of another corporation
Average tax rate = _____/_____
Tax/EBT
U.S
The ___ has a way higher corporate tax rate than other countries.
annual
The _____ report is the most important report that corporations issue to stockholders.
25, 15
The average tax rate for a U.S corporation is ___ %. Trump wants the tax rebate to be ___ for corporations.
Alternative Minimum Tax (AMT)
This tax requires individuals/corporations to calculate their tax 2 ways and pay the higher amount
Notes Payable, Longterm Debt, Preferred Stocks, and Common Equity
Total Capital inclues _____, __ ___, ____ and _____ ____.
Weighted Average Cost of Capital
WACC stands for?
Accounts Payable, Notes Payable, and Accurals
What are 3 current liabilities?
Federal Income Tax
What are municipal bonds not subject to?
Taxable Income
What is EBT also known as?
EBIT
What is Operating Income referred to as in an income statement?
Working Capital
What is another word for current assets?
accrued wages and accused taxes
What is in accruals?
Debt
What is the cheapest form of capital?
(#shares outstanding) (Po) -(Total Common Equity)
What she ether equation for MVA?
Munis
Whats another word for municipal bonds?
EBIT(1-T) - [ (Total Capital) - (A/P+ Accurals)](WACC)
Whats the other equation for EVA?
= Net Income - Noncash Revenues +Noncash charges
Whats the other equation for Net Cash Flow?
taxed
When you die, your stocks and house can't be _____ even if your kids use it.
stepped up cost basis
Why would the U.S want to tax capital gains differently?
Are interest expenses tax deductible?
Yes
EVA
____ has a very strong correlation to stock prices.
Interest income is taxed as _____ income.
ordinary
Corporate Capital Gains are taxed as ___ income, even if the capital gains are ____ term or _____ term.
ordinary, short, long
Dividend Income has the ____ caps as for capital gains.
same
