What are the firms earnings before interest and taxes

Assignment Help Corporate Finance
Reference no: EM13972378

Corporate Finance

1. Which of the following is an advantage of a corporation?

A. Permanence
B. Dilution of ownership
C. Elimination of double taxation
D. Ease of formation

2. A firm's sales increased by 50 percent and inventory was $100,000. According to the percent of sales method of forecasting, what will the new inventory be?

A. $150,000
B. $175,000
C. $100,000
D. $120,000

3. Which of the following is a correct statement about operating leverage?

A. Operating leverage results from use of fixed instead of variable cost.
B. Operating leverage is affected by the demand for the product.
C. Operating leverage is associated with less risk and more certainty.
D. Operating leverage results from using debt financing.

4. If a firm produces 50,000 widgets and sells each unit for $20.50, what is the total revenue generated by this production?

A. $10,250,000
B. $100,250
C. $10,250
D. $1,025,000

5. If a firm substitutes fixed for variable costs, which of the following will occur?

A. The use of financial leverage will be increased.
B. The profits will always be higher.
C. The break-even level of output will be reduced.
D. The degree of operating leverage will be increased.

6. Which of the following is an advantage of the sole proprietorship?

A. Limited liability
B. Ease of formation
C. Joint ownership
D. Ease of transfer of ownership

7. Which of these situations offers the best rationale for organizing a business as a limited partnership?

A. You want your small new business, which is operating out of your garage, to pay you and your partner (your spouse) dividends for which income tax will only be paid by you or your business, not both.
B. Management needs to raise money through a stock offering, but does not want to relinquish control of the business to stockholders.
C. You're an entrepreneur and you want two others' expertise, former business partners, to help execute your business plan.
D. Management rejects the idea of personally assuming liability for the business.

8. Which of the following statements about fixed costs is correct?

A. Fixed costs don't change with the size of the firm.
B. Fixed costs are greater than variable costs.
C. Fixed costs are paid before variable costs.
D. Fixed costs don't change with the level of output.

9. A product sells for $5 per unit. If fixed costs are $1,000 and variable costs are $2 per unit, what is the degree of operating leverage at 2,000 units?

A. 2.0
B. 1.2
C. 1.0
D. 0.83

10. Which of the following events would be most likely to increase the quantity breakeven point, assuming other factors remain constant?

A. Reduced marketplace competition enables LMN Corporation to raise its selling price for finance textbooks.
B. The city council has finally been persuaded: Your taxi business will pay lower water and sewer rates.
C. The pressure has subsided: The property owner, who rents space to your small manufacturing plant, has agreed to blacktop the employee and customer parking lot.
D. XYZ Corp agrees to increase its sales-commissions paid to employees by 12 percent.

11. Airlines have a high degree of operating leverage because of

A. insufficient government regulation.
B. small fixed expenses.
C. a large use of debt financing.
D. a large investment in fixed assets.

12. A product sells for $2 per unit. If fixed costs are $200 and variable costs are $1 per unit, what is the break-even level of output?

A. 150 units
B. 50 units
C. 200 units
D. 100 units

13. Which of the following is a correct statement about corporate losses?

A. They are carried forward to future years.
B. They are carried back three years and then carried forward.
C. They are carried forward three years and then carried back.
D. They offset other sources of income in prior years.

14. If ABC, Inc. has $650,000 in sales and $230,000 in expenses, what are the firm's earnings before interest and taxes (EBIT)?

A. $850,000
B. $325,000
C. $420,000
D. $650,000

15. A union contract suggests that labor costs may be

A. fixed.
B. undetermined.
C. variable.
D. a noncash expense.

16. Which of the following is a correct statement about fixed costs?

A. Fixed costs are paid before variable costs.
B. Fixed costs do not change with the size of the firm.
C. Fixed costs are greater than variable costs.
D. Fixed costs do not change with the level of output.

17. If investors want to limit financial risk and maximize their control of the business, which of the following forms of business should they prefer?

A. Limited partnership
B. Sole proprietorship
C. S corporation
D. Corporation

18. Which of the following situations would provide corporate management with the strongest rationale to carry forward current-year losses?

A. Management projects taxable income to remain unchanged over the next five years.
B. Congress just passed a very popular bill that reduces marginal federal income tax rates.
C. Management projects pre-tax losses over the next two years, and possibly even four years into the future.
D. Early in his first term this year, the President of the United States initiated legislation and signed into law a significant increase in income tax rates.

19. A firm does not obtain financial leverage by

A. issuing preferred stock.
B. borrowing from the bank.
C. issuing bonds.
D. issuing common stock.

20. Owners in which of the following forms of business have unlimited liability?

A. Sole proprietorships
B. Corporations
C. S corporations
D. Limited partnerships./

Reference no: EM13972378

What is the cost of equity using the expected growth method

According to the information given, what is the cost of equity using the expected growth method? If the internal rates of return of two mutually exclusive investments exceed t

List the three main forms of business organization

List the three main forms of business organization and describe their advantages and disadvantages. If you were to consider starting up a lawn-care business for the summer,

Explain three benefits of conducting an external analysis

Explain three benefits of conducting an external analysis. Educate Mr. Perry on some of the challenges of conducting an external analysis. Explain the two perspectives on the

What would be benefits of employing such a system in economy

Would the smaller firms have any advantage in terms of their ability to use such a system? Why or why not - what would be the benefits of employing such a system in the econom

Determine the financial feasibility of the project

Compute the NPV in the IRR to determine the financial feasibility of the project. What is the project's net present value (NPV) at a discount rate of 8%, and what is the proje

Analyze the exchange rate risks associated with transaction

Analyze the exchange rate risks associated with transaction, economic, and translation exposure in global markets, and develop risk management strategies to minimize the imp

How much will jayadev have at the end of fourty five years

Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will

What did jades jeans record as total current assets

What did Jade's Jeans record as Total Current Assets on December 31, 2015 balance sheet? What did Jade's Jeans record as Total Current Liabilities on December 31, 2015 balance

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd