# Fi 515

Submitted By Silkee86
Words 3145
Pages 13
1 | On its 1999 balance sheet, Sherman Books showed a balance of retained earnings equal to \$510 million. On its 2000 balance sheet, the balance of retained earnings was also equal to \$510 million. Which of the following statements is most correct? Show your calculations. | | | | | | | | | | | | | | a. The company must have had net income equal to zero in 2000. | | | | | | | | | | | | | | b. The company had a profit in 2000 but did not pay a dividend in 2000. | | | | | | | | | | | | | | c. the company’s net income in 2000 was \$200 million. | | | | | | | | | | | | | | d. If the company lost money in 2000, they must have paid a dividend. | | | | | | | | | | | | | | e. None of the statements above is correct. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Which of the following statements is most correct and explain why? | | | | | | | | | | | | | | | | | | | | | | | | | | | | a. Indexing tax brackets reduces the extent of "bracket creep." | | | | | | | | | | | | | 2 | b. Bonds issued by a municipality such as the city of Miami would carry a lower interest rate than bonds with the same risk and maturity issued by a private corporation such as Florida Power & Light. | | | | | | | | | | | | | | c. Our federal tax laws tend to encourage corporations to finance with debt rather than with equity securities. | | | | | | | | | | | | | | d. Our federal tax laws encourage the managers of corporations with surplus cash to invest it in stocks rather than in bonds. However, other factors may offset tax considerations. | | | | | | | | | | | | | | e. All of the above | | | | | | | | | | | | | | | | | | | | |...

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