corporate finance chapter two

Net working capital increases when:

inventory is sold at a profit

Cash flow to creditors increases when:

long-term debt is repaid

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

Market values:

reflect expected selling prices given the current economic situation.

Net income increases when:

revenue increases

Operating cash flow is defined as:

the cash that a firm generates from its normal business activities.

A firm's liquidity level decreases when:

inventory is purchased with cash

Cash flow to stockholders is defined as:

dividends paid minus net new equity raised.

What is the maximum average tax rate for corporations?

35%

Which one of the following is an intangible fixed asset?

Copyright

Production equipment is classified as:

a tangible fixed asset.

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

income statement

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

average tax rate

The financial statement that summarizes a firm's accounting value as of a particular date is called the:

balance sheet

Net working capital is defined as:

current assets minus current liabilities

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