FIN CH 2 Quiz

Which one of the following is included in the market value of a firm but not in the book value? Multiple Choice Partially built inventory Value of a partially depreciated machine Long-term debt Reputation of the firm Raw materials

Reputation of the firm

Given a profitable firm, depreciation: Multiple Choice increases net fixed assets. has no effect on net income. lowers taxes. decreases net working capital. increases net income.

lowers taxes

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: Multiple Choice marginal tax rate. variable tax rate. fixed tax rate. average tax rate. ordinary tax rate.

marginal tax rate.

If a firm has a negative cash flow from assets every year for several years, the firm: Multiple Choice may be continually increasing in size. is repaying debt every year. must also have a negative cash flow from operations each year. is operating at a high level of efficiency. has annual net losses.

may be continually increasing in size.

Cash flow from assets is defined as: Multiple Choice operating cash flow plus net capital spending plus the change in net working capital. the cash flow to shareholders minus the cash flow to creditors. cash flow to shareholders minus net capital spending plus the change in net working capital. operating cash flow minus the change in net working capital minus net capital spending. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders.

operating cash flow minus the change in net working capital minus net capital spending.

A negative cash flow to stockholders indicates a firm: Multiple Choice had a positive cash flow to creditors. had a net loss for the year. paid dividends that exceeded the amount of the net new equity. received more from selling stock than it paid out to shareholders. repurchased more shares than it sold.

received more from selling stock than it paid out to shareholders.

Net income increases when: Multiple Choice fixed costs increase. dividends cease. depreciation increases. the average tax rate increases. revenue increases.

revenue increases.

Omar's Market, a sole proprietorship has sales of $43,800, costs of $40,400, depreciation expense of $2,500, and interest expense of $1,100. If the tax rate is 21 percent, what is the operating cash flow, OCF? Assume tax losses can be carried forward and utilized. Multiple Choice $3,279 $3,013 $3,332 $3,511 $3,442

$3,442

The Milwaukee Printing Company has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net new equity raised during the year? Multiple Choice $34,000 $0 $21,500 $25,000 $42,500

$34,000

Lester's Fried Chick'n purchased its building 11 years ago at a cost of $189,000. The building is currently valued at $209,000. The firm has other fixed assets that cost $56,000 and are currently valued at $32,000. To date, the firm has recorded a total of $49,000 in depreciation on the various assets it currently owns. Current liabilities are $36,600 and net working capital is $18,400. What is the total book value of the firm's assets? Multiple Choice $241,000 $232,600 $251,000 $379,000 $214,400

$251,000

The passage of the Tax Cuts and Jobs Act of 2017 created a revised progressive tax structure, which applies to all of the following except: Multiple Choice LLCs. corporations. partnerships. unmarried individuals. sole proprietorships.

corporations.

Kahlan Opinion Surveys had beginning retained earnings of $24,600. During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9,000, dividends of $1,200, and interest paid of $635. The tax rate is 21 percent. What is the retained earnings balance at the end of the year? Multiple Choice $37,671.44 $35,835.50 $36,121.44 $36,082.15 $37,434

$35,835.50

Last year, Northside Pizza added $6,230 to retained earnings from sales of $104,650. The company had costs of $87,300, dividends of $2,500, and interest paid of $1,620. Given a tax rate of 21 percent, what was the amount of the depreciation expense? Multiple Choice $4,679 $4,414 $4,102 $3,908 $2,407

$4,679

Utamuro Markets has beginning long-term debt of $64,500, which is the principal balance of a loan payable to Centre Bank. During the year, the company paid a total of $16,300 to the bank, including $4,100 of interest. The company also borrowed $11,000. What is the value of the ending long-term debt? Multiple Choice $63,300 $58,200 $53,300 $85,900 $45,100

$63,300

Norris Company incurred depreciation expenses of $28,900 last year. The sales were $755,000 and the addition to retained earnings was $10,200. The firm paid interest of $6,200 and dividends of $5,000. The tax rate was 21 percent. What was the amount of the costs incurred by the company? Multiple Choice $691,013 $719,900 $707,413 $697,213 $700,659

$697,213

Chun Industries reports the following account balances: inventory of $417,600, equipment of $2,028,300, accounts payable of $224,700, cash of $51,900, and accounts receivable of $313,900. What is the amount of the current assets? Multiple Choice $56,000 $699,700 $975,000 $783,400 $46,700

$783,400

LaMarcus Photography, a sole proprietorship owes $190,874 in taxes on a taxable income of $608,606. The company has determined that it will owe $195,246 in tax if its taxable income rises to $620,424. What is the marginal tax rate at this level of income? Multiple Choice 38% 39% 32% 37% 35%

37%

In 2021, what was the maximum average tax rate for corporations? Multiple Choice 33% 39% 21% 25% 38%

38%

Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant? Multiple Choice An increase in net capital spending An increase in the change in net working capital A decrease in dividends paid A decrease in the cash flow to creditors An increase in depreciation

An increase in depreciation

The concept of marginal taxation is best exemplified by which one of the following? Multiple Choice Edwardsville Centre paid no taxes last year due to carryforward losses. Burke's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes. Mariano's Retreat paid only $45,000 in taxes on total revenue of $570,000 last year. Sunset Charters paid $2.20 in taxes for every $10 of revenue last year. Fazzari's paid $120,000 in taxes while its primary competitor paid only $80,000 in taxes.

Burke's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.