题目内容

Use of fixed costs is referred to as leverage because fixed costs:

A. create unnecessary financial costs.
B. enlarge the magnitude of both earnings and losses.
C. benefit creditors at the expense of owners.

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At the end of year 1, GG company’s disclosed earning before tax was $200,000 and the respective taxable income amounts to $150,000. The difference occurred as a result of the allowance for bad debt, which is not deductible for tax purpose. Assume GG`s current tax rate is 25% and the newly enacted tax rate will be 30%. Regarding the income statement for the first year, what amount of current tax payable should be reported？

A. $37,500.
B. $45,000.
C. $60,000.

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The uncertainty on whether borrowers can make promised payments on their debt obligations or not is best described as:

A. liquidity risk
B. default risk
C. market risk

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Which of the following may cause overestimation of profit？

A. Recognizing expense expenditures that should be capitalize
B. Not recognizing impairment loss for obsolete assets.
C. Reducing residual value for depreciation purposes.

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When considering the relationship between tax rate and WACC, other factors kept constant, which of following is most correct？

A. The higher the tax rate, the higher the WACC.
B. The higher the tax rate, the lower the WACC.
C. The higher the tax rate, the same the WACC.

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Use of fixed costs is referred to as leverage because fixed costs:

A. create unnecessary financial costs. B. enlarge the magnitude of both earnings and losses. C. benefit creditors at the expense of owners.

The uncertainty on whether borrowers can make promised payments on their debt obligations or not is best described as:

Which of the following may cause overestimation of profit？

When considering the relationship between tax rate and WACC, other factors kept constant, which of following is most correct？

A. create unnecessary financial costs.
B. enlarge the magnitude of both earnings and losses.
C. benefit creditors at the expense of owners.