23) Which of the following represents an attempt to measure
the net results of the firm’s operations (revenues versus expenses) over a
given time period?
A) balance sheet
B) statement of cash flows
C) income statement
D) sources and uses of funds statement

24) What information does a firm’s income statement provide
to the viewing public?
A) an itemization of all of a firm’s assets and liabilities
for a defined period of time
B) a complete listing of all of a firm’s cash receipts and
cash expenditures for a defined period of time
C) a report of revenues and expenses for a defined period
of time
D) a report of investments made and their cost for a
specific period of time

25) California Retailing Inc. has sales of $4,000,000; the
firm’s cost of goods sold is $2,500,000; and its total operating expenses are
$600,000. What is California Retailing’s EBIT?
A) $850,000
B) $875,000
C) $900,000
D) $1,300,000

26) California Retailing Inc. has sales of $4,000,000; the
firm’s cost of goods sold is $2,500,000; and its total operating expenses are
$600,000. The firm’s interest expense is $250,000, and the corporate tax rate
is 40%. What is California Retailing’s net income?
A) $288,000
B) $350,000
C) $377,000
D) $390,000

Corporation B reported earnings per share of $10. Corporation B has 100,000
shares of common stock outstanding and reported an increase in owners equity of
$400,000 for the period. Corporation B paid $50,000 in interest expense during
the period. Corporation B paid dividends per share of
A) $6.00.
B) $5.50.
C) $6.50.
D) $14.003.

28) The increase in owners equity for a given period is
equal to
A) positive net cash flow minus dividends.
B) net income minus dividends.
C) sales minus dividends.
D) gross profit minus distributions to shareholders.

29) A firm’s financing costs include
A) depreciation expense.
B) interest exposure.
C) costs of goods sold.
D) both A and B.

30) Corporation A decides to borrow $1,000,000 and use the
money to buy back $1,000,000 of its common stock. The corporation pays 6%
interest on its borrowed funds which exactly equals the amount of the dividend
it used to pay on the common stock it repurchased. Therefore
A) Corporation A’s operating income will decrease due to
higher interest expense.
B) Corporation A’s net income will increase due to the tax
deductibility of interest expense.
C) Corporation A will have no change in its operating
income since the interest expense exactly offsets the prior dividend payment.
D) Corporation A’s gross profit will decrease.

31) Gross profit is equal to
A) profits plus depreciation.
B) revenues – expenses.
C) earnings before taxes minus taxes payable.
D) sales – cost of goods sold.

32) An income statement may be represented as follows:
A) Sales – Liabilities = Profits.
B) Revenues – Liabilities = Net Income.
C) Sales – Expenses = Retained Earnings.
D) Sales – Expenses = Profits.

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