Question
answer only time sensitive 4 The firm is located in a state that pays a corporate income tax rate of 21%. Therefore, each additional $
answer only time sensitive
4
The firm is located in a state that pays a corporate income tax rate of 21%. Therefore, each additional $ of depreciation leads to a:
79 cent lower net income.
21 cent lower net income.
$1 decline in net income
5
Why is debt so-called "tax free"?
(2 Points)
because the debt service can be deducted from EBITDA before deducting tax.
because interest payments can be deducted from EBITDA before deducting tax.
because principal payments can be deducted from EBITDA before deducting tax.
6
A firm's gross profit margin stays constant, at 30%. The firm's CEO is very happy: its sales increase by 50%! How can the firm increase the sales by so much? (hint: write down the inventory turnover formula).
(2 Points)
The inventory increases by 10% and the inventory turnover stays constant -- and thus CGS increases by 10%. The firm makes "more product."
The inventory stays constant and the inventory turnover increases by 50%. The firm "sells its inventory and replenishes it."
The inventory declines by 25% and the inventory turnover increases by 5%. The firm "sells its inventory."
7
The charts on the right show Disney's net income, shareholder's equity, and Return on Equity. We learn that During fiscal 2019, the Company issued 307 million shares of common stock to acquire 20th century fox. Put yourself in the CEO's shoes. What could Bob Iger have done to avoid the plunging Return on Equity?
(2 Points)
Increasing the gross profit margin.
Take on more debt while lowering the asset turnover, which is too large.
Take on less debt while lowering the asset turnover, which is too low.
Increasing the net profit margin.
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