Under the Securities Exchange Act of 1934, Congress created the Securities and Exchange Commission (the ‘SEC’). The SEC’s mission is to administer federal securities laws and issue rules and regulations to provide protection for investors and to ensure that the securities markets are fair and honest. This is accomplished primarily by: a. creating a national […]
Net working capital can be defined as the portion of a firm’s current assets financed with long-term funds. Indicate whether the statement is true or false ANSWER FALSE
The tax rules for depreciation recapture are much more ________ than a simplified approach for disposal. A) basic B) complicated C) easy D) shortened ANSWER Answer: B
The current book value of an asset serves as the basis for determining the gain or loss at disposal. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Which is NOT a step in the estimation of after-tax cash flow at disposal? A) If selling price is greater than book value: Selling Price – Tax on Gain. B) If selling price is less than book value: Selling Price + Tax Credit on Loss. C) If book value is less than selling price: Selling […]
If the selling price of an asset at disposal is greater than its book value, then the after-tax cash flow is the selling price minus the tax on the gain. Indicate whether the statement is true or false. ANSWER Answer: TRUE
A firm that is unable to pay its bills as they come due is said to be insolvent. Indicate whether the statement is true or false ANSWER TRUE
Means by which the securities markets serve to mitigate principal-agent or information asymmetry problems include all of the following EXCEPT: a. Management realizes that its reputation with investors is valuable, and can be sustained only if accurate information is provided on a timely basis. b. Various market mechanisms exist to discipline a firm’s management, and […]
Book value is the original cost of an asset plus the accumulated depreciation. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Book value is the original cost of the asset MINUS the accumulated depreciation.
Fully depreciated assets have a positive book value, and so any proceeds from sale at disposal are taxable gains. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Fully depreciated assets have A BOOK VALUE OF ZERO, and so any proceeds from sale at disposal are taxable gains.
