FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 3: Financial Statements

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following statements is CORRECT?

A) The balance sheet for a given year, say 2011, is designed to give us an idea of what happened to the firm during that year.
B) The balance sheet for a given year, say 2011, tells us how much money the company earned during that year.
C) The difference between the total assets reported on the balance sheet and the liabilities reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP) .
D) If a company's statements were prepared in accordance with generally accepted accounting principles (GAAP) , the market value of the stock equals the book value of the stock as reported on the balance sheet.
E) The assets section of a typical industrial company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last.

F) A) and B)
G) None of the above

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Carter Corporation has some money to invest, and its treasurer is choosing between City of Chicago municipal bonds and U.S. Treasury bonds. Both have the same maturity, and they are equally risky and liquid. If Treasury bonds yield 6%, and Carter's marginal income tax rate is 40%, what yield on the Chicago municipal bonds would make Carter's treasurer indifferent between the two?

A) 3.42%
B) 3.60%
C) 3.78%
D) 3.97%
E) 4.17%

F) C) and E)
G) A) and B)

Correct Answer

verified

Show Answer

Question 53

Multiple Choice

Review LaterAdd Note

Griffey Communications recently realized $125,000 in operating income. The company had interest income of $25,000 and realized $70,000 in dividend income. The company's interest expense was $40,000. Using the corporate tax schedule above, what is Griffey's tax liability?

Mays Industries was established in 2006. Since its inception, the company has generated the following levels of taxable income (EBT) Assume that each year the company has faced a 40% income tax rate. Also, assume that the company has taken full advantage of the Tax Code's carry-back, carry-forward provisions, and assume that the current provisions were applicable in 2006. What is the company's tax liability for 2011?

On 12/31/11, Hite Industries reported retained earnings of $525,000 on its balance sheet, and it reported that it had $135,000 of net income during the year. On its previous balance sheet, at 12/31/10, the company had reported $445,000 of retained earnings. No shares were repurchased during 2011. How much in dividends did the firm pay during 2011?

Your corporation has a marginal tax rate of 35% and has purchased preferred stock in another company. The before-tax dividend yield on the preferred stock is 12%. What is the company's after-tax return on the preferred, assuming a 70% dividend exclusion?

Both interest and dividends paid by a corporation are deductible operating expenses, hence they decrease the firm's taxes.

Hayes Corporation has $300 million of common equity, with 6 million shares of common stock outstanding. If Hayes' Market Value Added (MVA) is $162 million, what is the company's stock price?

Corporations face the following tax schedule: Company Z has $80,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend income from preferred stock it holds in other corporations. What is Company Z's tax liability?

A 5-year corporate bond yields 9%. A 5-year municipal bond of equal risk yields 6.5%. Assume that the state tax rate is zero. At what federal tax rate are you indifferent between the two bonds?

The time dimension is important in financial statement analysis. The balance sheet shows the firm's financial position at a given point in time, the income statement shows results over a period of time, and the statement of cash flows reflects specific changes in accounts over that period of time.

Van Dyke Corporation has a corporate tax rate equal to 30%. The company recently purchased preferred stock in another company. The preferred stock has an 8% before-tax yield. What is Van Dyke's after-tax yield on the preferred stock?

A bond issued by the State of Pennsylvania provides a 9% yield. What yield on a Synthetic Chemical Company bond would cause the two bonds to provide the same after-tax rate of return to an investor in the 35% tax bracket?

Your corporation has the following cash flows: If the applicable income tax rate is 40% (federal and state combined) , and if 70% of dividends received are exempt from taxes, what is the corporation's tax liability?

Last year, Delip Industries had (1) negative cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Which of the following factors could explain this situation?

Rao Construction recently reported $20.50 million of sales, $12.60 million of operating costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. What was Rao's operating income, or EBIT, in millions?

Which of the following statements is CORRECT?

Granville Co. recently purchased several shares of Kalvaria Electronics' preferred stock. The preferred stock has a before-tax yield of 8.6%. If the company's tax rate is 40%, what is Granville Co.'s after-tax yield on the preferred stock?

Which of the following factors could explain why Michigan Energy's cash balance increased even though it had a negative cash flow last year?

West Corporation has $50,000 that it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County tax-free municipal bonds yielding 8.5%; Exxon Mobil bonds yielding 10.5%; and GM preferred stock with a dividend yield of 9.25%. West's corporate tax rate is 35%. What is the after-tax return on the best investment alternative? (Assume the company chooses on the basis of after-tax returns.)