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Exam 3: Financial Statements, cash Flow, and Taxes

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Question 71

Multiple Choice

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Which of the following items cannot be found on a firm's balance sheet under current liabilities?

A) Accounts payable.
B) Short-term notes payable to the bank.
C) Accrued wages.
D) Cost of goods sold.
E) Accrued payroll taxes.

F) B) and D)
G) C) and E)

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Question 72

True/False

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The amount shown on the December 31,2015,balance sheet as "retained earnings" is equal to the firm's net income for 2015 minus any dividends it paid.

A) True
B) False

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Question 73

True/False

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EBITDA stands for earnings before interest,taxes,debt,and assets.

The Nantell Corporation just purchased an expensive piece of equipment.Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis,but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years.Other things held constant,which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Which of the following statements is CORRECT?

Byrd Lumber has 2 million shares of common stock outstanding that sell for $17 a share.If the company has $40 million of common equity on its balance sheet,what is the company's Market Value Added (MVA) ?

Below is the common equity section (in millions) of Timeless Technology's last two year-end balance sheets: ​ The firm has never paid a dividend to its common stockholders.Which of the following statements is CORRECT?

For 2014,Bargain Basement Stores reported $11,500 of sales and $5,000 of operating costs (including depreciation) .The company has $20,500 of total invested capital,the weighted average cost of that capital (the WACC) was 10%,and the federal-plus-state income tax rate was 40%.What was the firm's Economic Value Added (EVA) ,i.e.,how much value did management add to stockholders' wealth during 2014?

Interest paid by a corporation is a tax deduction for the paying corporation,but dividends paid are not deductible.This treatment,other things held constant,tends to encourage the use of debt financing by corporations.

Brown Office Supplies recently reported $15,500 of sales,$8,250 of operating costs other than depreciation,and $1,750 of depreciation.It had $9,000 of bonds outstanding that carry a 7.0% interest rate,and its federal-plus-state income tax rate was 40%.How much was the firm's earnings before taxes (EBT) ?