Midterm Study Guide

1.Which corporate structure are taxes based on the individual owner's tax rates?

2.What does double taxation mean?

3.What are depreciable assets and how does salvage value work?

4.How is the "Change in Cash Position" from the statement of cash flows impacted by changes in non-cash expenses like depreciation? How is it impacted by changes in cash positions like the purchase of depreciable and non-depreciable assets?

5.What is the balance sheet equation? How do you calculate the firm's total equity value? How might a change in one of the key components of the balance sheet equation impact the others?

6.What is contributed capital? How could you get a value of $0 for contributed capital?

7.What types of items (expenses and/or revenues) would you expect to see on a cash income statement? How about on an accrual cash income statement? What are the differences?

8.Looking at an accrual income statement, what items from balance sheet cause total revenue to increase or decrease? What items from balance sheet cause total expenses to increase or decrease?

9.How is the balance sheet and statement of cash flows connected? If the statement of cash flows changes, what is impacted on the balance sheet? What about changes on the balance that impact the statement of cash flows?

10.Where do the dollars of the net income after taxes go at the end of the accrual incomes statement?

11.What are examples of overhead expenses? What are examples of COGS?

12.What are examples of capital gains? What about capital losses?

13.How do you calculate the average interest rate of liabilities? What variables do you need?

14.How do you get (calculate) the firm's earnings before taxes (EBT) and earnings before interest and taxes (EBIT)?

15.How do you calculate the average tax rate on return on assets? What about the average tax rate on return on equity? What variables do you need for both?