Finance ch 2

Which one of these is correct?

Net income is distributed either to dividends or retained earnings.

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

average tax rate

Cash flow to stockholders is defined as:

dividends paid minus net new equity raised

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:

had to decrease

Financial leverage:

increases the potential return to the stockholders

Cash flow to creditors is defined as:

interest paid minus net new borrowing

Given a profitable firm, depreciation:

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:

marginal tax rate

Cash flow from assets is defined as:

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

The concept of marginal taxation is best exemplified by which one of the following?

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