multiple choice 97 a company with income before income taxes of 100 000 and 20 000 i 4359852

 

MULTIPLE CHOICE

 

97.A company with income before income taxes of $100,000, and $20,000 in interest expense, has an interest coverage ratio of

 

a.

7 times.

b.

5 times.

c.

4 times.

d.

6 times.

 

 

 

98.The advantages of financial leverage accrue primarily to

 

a.

the government.

b.

management.

c.

stockholders.

d.

creditors.

 

 

 

99.The debt to equity ratio is usually expressed in terms of

 

a.

dollars.

b.

a percentage.

c.

days.

d.

units.

 

 

 

100.Which of the following is an example of off-balance-sheet financing?

 

a.

Notes

b.

Bonds

c.

Dividends

d.

Leases

 

 

 

101.The interest coverage ratio equals income before income taxes plus interest expense divided by

 

a.

total assets.

b.

net income.

c.

interest expense.

d.

income before income taxes.

 

 

 

102.Which of the following qualifies as a capital lease?

 

a.

Three-year lease on a company vehicle

b.

Five-year lease on a machine that has a five-year useful life

c.

Two-year lease on a computer with an option to renew for one more year

d.

Monthly lease on office space that can be canceled with 30 days' notice

 

 

 

103.Other postretirement benefits should be expensed

 

a.

as they are received by the employee.

b.

on the employee's retirement date.

c.

when the employee is hired.

d.

as the employee earns them.

 

 

 

104.Deferred income taxes arise when

 

a.

a corporation is able to obtain an extension on its income tax filing.

b.

an expense is not deductible for tax purposes.

c.

a revenue item is not subject to income taxes.

d.

there is a discrepancy between financial reporting requirements and income tax filing requirements.

 

 

 

105.Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

 

a.

Both payment of principal and interest expense decrease

b.

Payment of principal increases and interest expense decreases

c.

Interest expense increases and payment of principal decreases

d.

The proportion of interest expense to payment of principal remains the same

 

 

 

106.All of the following are operating leases except a

 

a.

five-year lease on a computer with an option to buy for a small amount at the end of the lease.

b.

monthly lease on a building that can be canceled with 90 days' notice.

c.

two-year lease on a truck with an option to renew for one more year.

d.

ten-year lease on a new building.

 

 

 

 

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