Similarly, the inflation rate is equal to the growth rate of the nominal money supply minus the growth rate of real money demand. 9. Factors that could increase the public’s expected rate of inflation include a rise in money growth or a decline in income growth. With no effect on the real interest rate, the increase in the expected inflation rate would increase the nominal interest rate. Numerical
C. Variable costs per unit of output remain constant as volume changes. D. Sales price per unit remains constant as volume changes. E. All of these are basic assumptions. 4. The excess of expected sales over the sales level at the break-even point is known as the: A.
B. should always be equal to net realizable value less a normal profit margin. C. should always be equal to net realizable value. D. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. 16) The retail inventory method is based on the assumption that the A. ratio of cost to retail changes at a constant rate. B. proportions of markups and markdowns to selling price are the same.
EGT1 - Economics Subdomain: 309.1 - Task 1 A. Profit Maximization a1. The total revenue (TR) to total cost (TC) approach relies on the fact that profit equals revenue minus that cost and focuses on maximizing the greatest difference between TR and TC. Total Revenue (TR): Is the income derived from the sales of a given product. (McConnell., 2011) This total does not take include the cost of producing the product.
The total value of the levered firm exceeds the value of the firm without leverage due to the present value of the tax savings from debt: V^L = V^U + PV(interest tax shield) 4. when a firm’s marginal tax rate is constant, and there are no personal taxes, the present value of the interest tax shield from permanent debt equals the tax rate times the value of the debt, τcD. 5. The firm’s pretax WACC measures the required return to the firm’s investors. Its effective after-tax WACC, or simply the WACC, measure the cost to the firm after including the benefit of the interest tax shield. Page 484 has formulas!!
These ratios will be calculated from the income statement, balance sheet and statement of cash flows Liquidity Liquidity Ratios measure a company’s ability to meet its short-term debt obligations without disrupting normal operation. The higher the ratio the better a company will be at meeting its short-term obligations as well as have extra cash to cover any unforeseen cash requirements. The liquidity measures we will use are the current ratio, current cash debt ratio, inventory turnover, average days in inventory, receivable turnover ratio and average collection period. The current ratio measures the company’s ability to pay its short-term liabilities (payables and debt) with short-term assets (cash, receivables and inventory). Tootsie Roll exceeds its ability to meet short-term debt obligations with $3.45 in current assets for every $1 in current liabilities.
Prepare Post Closing Trial Balance Ratios 1. Debt ratio = Total liabilities Total assets Purpose: Show the ability of the company to repay its obligations when a company finances the purchase of assets using debt. A company with a low debt ratio will not have difficulty making the required payments. Generally a debt ratio below .60 is desirable. A ratio around .80 or 80% is considered high risk.
Market failure refers to a situation in which the market does not allocate resources efficiently. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxii]. Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society’s resources. ANSWER: F TYPE: T KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxiii]. A monopolist has market power.
Define the price elasticity of demand and show how it is calculated. Answer: The units-free measure of the responsiveness of the quantity demanded of a good to a change in it s price when all other influences on buying plans remain the same. 3. What is the total revenue test? Explain how it works.
The more recent costs are matched against current revenues. c. There will be a deferral of income tax. d. A company's future reported earnings will not be affected substantially by future price declines. 82. Which of the following is true regarding the use of LIFO for inventory valuation?