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1. Define a consumption tax system (Points : 5)

2. Define debt financing (Points : 5)

3.Generally, merchandise is sold on credit under terms such as 2/10, net 30, meaning the buyer may deduct 10% from the bill if he pays within 2 days or pay the full amount within thirty days.(Points : 5)

True
False

4.The essence of finance is the process of raising capital (money), exclusively through the sale of bonds. (Points : 5)

True
False

5. What is the importance of cash flow (Points : 5)

6.What is double taxation (Points : 5)

7. Is a gain on the sale of equipment the same as the cash received? Explain.(Points : 5)

8.- What are the three ways a company can raise money (Points : 5)

9.What is the make-up of the Financial Management department (Points : 5)

10. What is the difference between net income and cash (Points : 5)

11.Suppose pre-tax earnings are $100,000.00 and the corporate tax rate is 42%. How much additional money can a business owner receive by declaring the earnings as personal income which is taxed at a rate of 31% (Points : 5)

12.The income statement reflects flows of money over a period of time. The balance sheet represents stocks of money at a point in time. (Points : 5)

True
False

13.Exxon Corp. bought an oil rig exactly 6 years ago for $100,000,000. Exxon depreciates oil rigs straight line over 10 years assuming no salvage value. The rig was just sold to British Petroleum for $30,000,000. What Capital Gain/Loss will Exxon report on this transaction (Points : 10)

14.Should investors be concerned about the ethics of the firms in which they invest? Why or why not? If most of investors worry about it, how will that affect corporate behavior (Points : 10)

15.Can a firm go out of business while making an accounting profit. Think about a company that buys a lot of inventory, starts a factory running and then sells most of the product (at a price far above cost) to a customer who is slow in paying. Exactly why may the company fail?

(Points : 10)

16.The Tappan family has taxable income of $50,000. Tax tables indicate that the first $20,000 of income will be taxed at 24% and all income above $20,000 will be taxed at 30%. What are the Tappan's marginal and effective tax rates (Points : 10)

 

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