Exam 3: Understanding Financial Statements, Taxes, and Cash Flows

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's EBIT?

The most important tax rates. for financial decisions are ________ tax rates.

Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)?

Which of the following is NOT included in computing EBT (earnings before taxes)?

A & K Co. expects to have earnings before taxes of $250,000 to $300,000. The company's marginal tax rate is 39% and its average tax rate about 33%. For every additional dollar A & K's pays out in common dividends, it's income tax liability will

The cash flow statement shows amounts that the company has earned but for which it has not yet received cash.

2015 U.S. Corporate tax rates are shown below: RJH Inc. has earnings before taxes of $100,000 in 2015. The company's tax expense will be

The revenue recognition principle requires that

On the income statement, sales revenue, minus cost of goods sold and operating expenses, equals

Net plant and equipment is

Balance sheet and other accounts for GPA are listed below in alphabetical order. Use these accounts to construct GPA's balance sheet for 2016. All balance sheet accounts are shown, but some accounts will not be used. All amounts are in millions of dollars. Accounts payable $1900 Accounts receivable $661 Cash $1,000 Common stock $2,000 EBIT $1,968 Interest expense $8.00 Inventories $1,620 Long-term debt $890 Net plant & equipment $2,563 Other current assets $645 Other long-term assets $576 Retained earnings $2,080 Short-term debt $195 Taxes, $778

Which of the basic financial statements is best used to answer questions about changes in owner's equity that are not explained by the income statement?

When analyzing the cash flows from a new project proposal, a company should always use its marginal tax rate.

The change between a firm's beginning cash balance and ending cash balance would equal

International Financial Reporting Standards (IFRS)

Gross plant and equipment minus accumulated depreciation represents the fair market value of a company's fixed assets.

Which of the basic financial statements is best used to answer the questions "Where did the company's money come from and how was it spent over the preceding year?"

A corporation's average tax rate will always be lower than or equal to its marginal tax rate.

An advantage of balance sheet numbers is that assets reflect current market values.

Who owns the retained earnings of a public firm?