16. Net income for the year $1,000,000

EBT for the year $2,500,000

Retained Earnings January of that year $5,000,000

Common Stock Dividends paid for the year $300,000

Number of shares of common stock outstanding 1,000,000

What are end-of-year retained earnings?

a.$5,900,000

b.$6,000,000

c.$7,100,000

d.$5,700,000

17. Net income is $100,000 and common stock dividends paid are $100,000 for the year.Retained earnings were $500,000 at the beginning of the year.

The end of year balance in retained earnings would be:

a.$500,000

b.$300,000

c.$400,000

d.$600,000

18. Depreciation expense:

a.is not a true expense

b.represents a cash outflow on the cash flow statement

c.is deducted from net income

d.is a tax deductible non-cash expense

19. Which of the following statements is true of the statement of cash flows?

a.it measures changes in profit from one year to the next year

b.it includes changes in net working capital only

c.it is the same as the income statement

d.it includes dividends paid

20. A firm increases its debt ratio from 50% to 75%.Which of the following statements is most correct:

a.the firm probably has very low borrowing

b.the firm's positive ROE will increase

c.the stockholders' leverage has decreased

d.earnings after interest expense but before taxes will increase