"Executives would prefer to show lower earnings per share because the company's tax bill will be reduced." Discuss
Q: Write down two reasons why may have decided to retain such a large percentage of their earnings
A: Write down two reasons why may have decided to retain such a large percentage of their earnings.
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A: A company uses two main types of funding – debt and equity. Debt refers borrowings and liabilities…
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A: Fiscal multipliers measure the impact of discretionary fiscal policy on output of the economy.They…
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A: Dividend policy represents the decision-making of the management regarding the declaration or…
Q: If the corporate tax rate is greater than zero, how would taxes affect the firm's cost of capital?
A: Solution:- Cost of capital means the minimum rate of return required by the investors of a firm ie.…
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A: The cost of conducting business that a company in financial crisis faces, such as a greater cost of…
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A: The dividends is the distribution of surplus profit by a company to its shareholders. It is given as…
Q: If Congress wants to stimulate the economy, explainhow it might alter each of the following: (a)…
A: (a) If congress wants to stimulate the economy, it must reduce the personal income taxes for the…
Q: Which one of the following is not an effect of an increase in leverage Managers have fewer…
A: Increases in leverage means introducing more debt into capital structure.
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A: An initial public offering refers to the new or fresh issue of stock to a group of investors.…
Q: Which one of the following is a soft benefit? Depreciation tax shield Reduction in the number…
A: Soft benefit:- It is the benefits that can be measured in terms of money. It can include aspects…
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A: The objective of the question is to understand the financial implications of Taggart Technologies…
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A: Sales tax refers to the amount of tax collected by the seller on sale of goods and paid to the…
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A: The Efficient Market Hypothesis (EMH) is a theory in finance that states that financial markets are…
Q: Why do companies accelerate depreciation on their tax return but often use slower depreciation…
A: Companies generally use accelerated depreciation on their tax return, as these methods result in a…
Q: Consumer prices will increase
A: Correct Answer is :- A Consumer price will increase
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A: Restructuring is a process in which company change their capital structure, and debt convert into…
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A: This saying is completely true. Because business is done for profit, and interest is an expenses if…
Q: A company's board thinks it needs to reward top management for advancing the company's aims. The…
A: Bonus share: It is a share issued by the company to some specific individuals for their good…
Q: intrinsic
A: The board of directors of the company generally expect the management to focus on maximizing the…
Q: Which statement is true about credits? Credits always increase the net worth of a company.…
A: Introduction: A credit, frequently abbreviated CR, is an accounting word for an entry made on the…
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A: "Other gains and losses" in financial reporting refer to non-operating items that can impact a…
Q: When analyzing a company's financial report, what are the most likely indicators that a company is…
A: A tax is a financial charge imposed by government. It is a source of income for the governments to…
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A: Here there is a conflict of interest between the owners (i.e. the shareholders) and the agents (the…
Q: What is one potential impact of tax reforms on small businesses? a) Increased compliance costs b)…
A: The question is asking about the potential impact of tax reforms on small businesses. Tax reforms…
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A: Income of the business is very important and useful measure of profitability of the business. More…
Q: Would a Financial Manager's role (functions) in a corporation increase or decrease in importance if…
A: Financial manager is a person who takes all the decisions related to funds for the firm by…
Q: End. Bal. 2. 12. End. Bal. 33 12,357 Raw Materials 210✔ 1,950✔ 2,040 0 120 0 3. 23. End. Bal. X…
A: The amount of 7,023 has come from Cost of Goods Sold and Selling and Administration Expenses and…
Q: Which of the following theories is supported by the argument that shareholders can transform a…
A: The correct answer is:b. "bird-in-the-hand" theoryExplanation:The "bird-in-the-hand" theory,…
Q: Operating leverage exists when: small percentage changes in revenue produce large percentage changes…
A: Operating leverage: It is a ratio that measures the proportion of fixed cost on the total costs and…
Q: Why do you believe businesses rely heavily on revenue recognition to inflate profits
A: Here is the Answer
Q: "Financial manager
A: Financial managers are the person who is responsible for the financial health of the company and…
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A: A company's Earning per share is defined as the earnings available to shareholders divided by the…
Q: favorable tax status
A: Favorable tax status is an advantage of getting reduced tax rates or taxable income or exemption…
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A: If corporate taxes are imposed on firm this will reduce the after-tax effect at each and every level…
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A: Since you have a question with multiple subparts we will solve the first three subparts for you. If…
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A: The annual rate of return (ARR) is a financial metric used to evaluate the profitability of an…
Q: Why do the companies in high tax brackets incur lower after-tax interest costs by financing through…
A: Debts are the liability issued by the company to raise funds. The debt holder receives fixed…
Q: Which of the following statements is most accurate? A. Financial leverage is directly…
A: Operating leverage refers to the degree to which a company's operating income or earnings before…
Q: Which of the following is a disadvantage of long-term debt as a means of company financing? Group…
A: Funds are very important and necessary for smooth running of a business organization. A business has…
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A: Several factors have been given that are expected to impact the stock's price. We have to find the…
Q: Indicate whether the following statements is true or false. Provide the relevant explanations. In…
A: The cost of capital is the rate of return that investors require to invest in a company's…
"Executives would prefer to show lower earnings per share because the company's tax bill will be reduced." Discuss
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- Debate Over Allowing Big Businesses to Lower Tax Overheads The question of whether big businesses should be permitted to lower their tax overheads is a contentious issue that touches upon economic, social, and ethical considerations. Advocates argue that businesses have a fiduciary responsibility to their shareholders to maximize profits legally. Employing tax planning strategies to minimize tax liabilities allows businesses to retain more earnings, which can be reinvested into the company for expansion, innovation, and job creation. Additionally, proponents contend that tax incentives and deductions provided by governments are designed to encourage investment and economic growth, and businesses have the right to take advantage of these incentives within the confines of the law. On the other hand, critics argue that allowing big businesses to lower their tax overheads through aggressive tax avoidance measures can have detrimental effects on society. Such practices can exacerbate income…FIFO and weighted average. But what if a company wants to use LIFO to report its inventory because of the significant tax benefit? How could dollar-value LIFO help them use FIFO for managerial purposes but LIFO for financial statement reporting?Company A pays its managers a fixed cash salary. Company B adds ‘Short Term Incentives’ which involve extra cash payments linked to profits. Company C pays part of the compensation in company shares. Which Company’s compensation is most likely to mitigate conflicts of interest between managers and shareholders?
- Why would a company choose to have a low dividend payout ratio? A.The company has many investment opportunities with high growth potential B.The company has few investment opportunities and they have low growth potential C.The company has very low profits D.The company has very high profits E.The board of directors has decided to do so. B,C only A,C,Eonly B,D,Eonly B,C,Eonly A, C, DonlyIf the stock market is efficient, why do companies manage their earnings? O To avoid violating debt covenants. O To receive bonuses based on reported earnings. O Because companies do not believe the Efficient Market Hypothesis. O All of the above.4. Which of the below statements is false about the Static Tax Clientele Theory of payout policy? Investors with high capital gains tax relative to marginal income tax prefer cash dividends An individual company cannot increase its value by changing its payout policy Companies with high dividend payout rates attract investors with relatively low tax rates There is a static equilibrium where companies with low dividend payout rates attract investors with relatively high tax rates None of the above
- JKW Corporation (a fictional company) has been selling plumbing supplies since 1981. In 2003, the company adopted the LIFO method of valuing its inventory. The company has grown steadily over the years and a layer has been added to its LIFO inventory in each of the years the method has been used. The company's inventory turnover ratio has averaged 4.5 in recent years. Management attempts to maintain a stable level of inventory at each store; the growth in inventory has been due to new stores being opened each year. In 20X1, the board of directors approved an incentive program that pays managers a sizable bonus in each year that certain performance targets are met. For 20X2, targeted earnings per share are $3.35. In an effort to track progress toward meeting this target, management produced the following income statement for the first nine months of 20X2. JKW Corporation Income Statement January 1-September 30, 20X2 Sales $13,284,000 Cost of goods sold Gross margin Operating expenses…5 Which of the following would not affect a company's net income? A change in the company's income taxes Changing the selling price of a company's product Paying a dividend to stockholders Advertising a new productWhich of the following would reduce a firm's WACC after tax? a. A firm invests in an average-risk project using equity, rather than debt financing. b. A supermarket chain decides to establish hardware stores which increases its systematic risk. c. A firm issues shares and uses the proceeds to pay off a bank loan. d. A firm issues bonds and uses the proceeds to repurchase stock. e. A firm significantly improves its operating cost control to boost profits.
- How would an increase in corporate taxes tend to affect an average firm’s capitalstructure? What about an increase in the personal tax rate?4. Classify each of the following factors/cases based on whether they favor a low dividend policy or high dividend policy? (explain why) A. The tax on capital gains is deferred until the gain is realized. B. Few, if any, positive net present value projects are available to a firm. C. A majority of the shareholders have a low tax rate. D. A majority of the shareholders have better investment opportunities than the firm. E The presence of an agency conflict with the company's senior managers.Jones Group has been generating stable after-tax return on equity (ROE) despite declining operating income. Explain how it might be able to maintain its stable after-tax ROE.
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