FIN 300 Exam 1 || Graded A+.
One of the most important disadvantages of the corporate form of business is correct answers
Double taxation
Profit maximization correct answers Does not consider future cash flows or risk
Hillary wishes to form a company that will specialize in tax waste removal and storage. What
type of business form would be most advantageous correct answers A corporation due to its
limited liability
Which of the following is true correct answers As the length of time until an expected cash flow
increases, the stock price decreases
The income statement correct answers A financial statement that summarizes a firm's revenues
and expenses of a period of time
Each of the following items is a liability with the exception of correct answers Prepaid expenses
Earnings per share correct answers Net income (400,000) - Preferred dividends paid (65,000) /
Common stock outstanding (100,000) = 3.35
SUBTRACT PREFERRED STOCK NOT COMMON
Depreciation correct answers A tax deductible non-cash expense
The balance sheet correct answers Is a financial statement that details the firm's assets and
liabilities at a particular point in time
Which of the following items is not part of current assets? correct answers Accounts payable
, Net income correct answers Sales Revenue (2,000) - COGS (800) = Gross profit - General and
administrative expenses (120) - depreciation expense (200) - Interest expense (15) X Tax rate (.6)
Average Tax Rate correct answers EBT = 80,000
(0-50,000) *.15 = 7,500
(50,001 - 75,000) * .25 = 6,249
(75,001 - 80,000) * .34 = 1,699.66
Add up and divide by EBT
Interest expense is deducted: correct answers Before taxes are calculated but after operating
expenses
Net income is $1,000,000 for the year, EBT is $2,500,000, retained earnings in January were
$5,000,000, common stock dividends paid for the year are $300,000, and common shares
outstanding are 1,000,000. What are end-of-year retained earnings? correct answers Net income
(1,000,000) + Retained Earnings (5,000,000) - Stock paid (300,000) =5,700,000
Which of the following equations describes net working capital correct answers Total assets -
fixed assets - current liabilities
Which of the following statements is true in a progressive tax rate system? correct answers The
marginal tax rate increases at higher taxable income levels
Income ratio correct answers Current assets / current liabilities
=
Cash + Inventory + AR + Marketable Securities / Accounts payable + Notes payable + accrued
expenses
Net profit margin correct answers Net income after taxes / sales (NOT DIVIDENDS)
One of the most important disadvantages of the corporate form of business is correct answers
Double taxation
Profit maximization correct answers Does not consider future cash flows or risk
Hillary wishes to form a company that will specialize in tax waste removal and storage. What
type of business form would be most advantageous correct answers A corporation due to its
limited liability
Which of the following is true correct answers As the length of time until an expected cash flow
increases, the stock price decreases
The income statement correct answers A financial statement that summarizes a firm's revenues
and expenses of a period of time
Each of the following items is a liability with the exception of correct answers Prepaid expenses
Earnings per share correct answers Net income (400,000) - Preferred dividends paid (65,000) /
Common stock outstanding (100,000) = 3.35
SUBTRACT PREFERRED STOCK NOT COMMON
Depreciation correct answers A tax deductible non-cash expense
The balance sheet correct answers Is a financial statement that details the firm's assets and
liabilities at a particular point in time
Which of the following items is not part of current assets? correct answers Accounts payable
, Net income correct answers Sales Revenue (2,000) - COGS (800) = Gross profit - General and
administrative expenses (120) - depreciation expense (200) - Interest expense (15) X Tax rate (.6)
Average Tax Rate correct answers EBT = 80,000
(0-50,000) *.15 = 7,500
(50,001 - 75,000) * .25 = 6,249
(75,001 - 80,000) * .34 = 1,699.66
Add up and divide by EBT
Interest expense is deducted: correct answers Before taxes are calculated but after operating
expenses
Net income is $1,000,000 for the year, EBT is $2,500,000, retained earnings in January were
$5,000,000, common stock dividends paid for the year are $300,000, and common shares
outstanding are 1,000,000. What are end-of-year retained earnings? correct answers Net income
(1,000,000) + Retained Earnings (5,000,000) - Stock paid (300,000) =5,700,000
Which of the following equations describes net working capital correct answers Total assets -
fixed assets - current liabilities
Which of the following statements is true in a progressive tax rate system? correct answers The
marginal tax rate increases at higher taxable income levels
Income ratio correct answers Current assets / current liabilities
=
Cash + Inventory + AR + Marketable Securities / Accounts payable + Notes payable + accrued
expenses
Net profit margin correct answers Net income after taxes / sales (NOT DIVIDENDS)
