FIN 101 Chapter 2

Which one of the following terms is defined as the total tax paid divided by the total taxable income? A. Average tax rate B. Variable tax rate C. Marginal tax rate D. Absolute tax rate E. Contingent tax rate

Average tax rate

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: A. average tax rate. B. variable tax rate. C. marginal tax rate. D. fixed tax rate. E. ordinary tax rate.

marginal tax rate.

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the: A. statement of cash flows. B. income statement. C. GAAP statement. D. balance sheet. E. net working capital schedule.

B. income statement.

.The concept of marginal taxation is best exemplified by which one of the following? A. Kirby's paid $120,000 in taxes while its primary competitor paid only $80,000 in taxes. B. Johnson's Retreat paid only $45,000 on total revenue of $570,000 last year. C. Mitchell's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes. D. Burlington Centre paid no taxes last year due to carryforward losses. E. The Blue Moon paid $2.20 in taxes for every $10 of revenue last year.

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

Net working capital is defined as: A. the depreciated book value of a firm's fixed assets. B. the value of a firm's current assets. C. available cash minus current liabilities. D. total assets minus total liabilities. E. current assets minus current liabilities.

current assets minus current liabilities.

Net capital spending is equal to: A. ending net fixed assets minus beginning net fixed assets plus depreciation. B. beginning net fixed assets minus ending net fixed assets plus depreciation. C. ending net fixed assets minus beginning net fixed assets minus depreciation. D. ending total assets minus beginning total assets plus depreciation. E. ending total assets minus beginning total assets minus depreciation

ending net fixed assets minus beginning net fixed assets plus depreciation.

The financial statement that summarizes a firm's accounting value as of a particular date is called the: A. income statement. B. cash flow statement. C. liquidity position. D. balance sheet. E. periodic operating statement

balance sheet.

Cash flow to creditors increases when: A. interest rates on debt decline. B. accounts payables decrease. C. long-term debt is repaid. D. current liabilities are repaid. E. new long-term loans are acquired.

long-term debt is repaid.

Cash flow from assets is defined as: A. the cash flow to shareholders minus the cash flow to creditors. B. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders. C. operating cash flow minus the change in net working capital minus net capital spending. D. operating cash flow plus net capital spending plus the change in net working capital. E. 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.

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

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