Imelda Reports Only Half the Cash from the Vending Machines

question 115

Multiple Choice

Imelda reports only half the cash from the vending machines on her cash flow statement and income tax returns.Her purpose in doing so is:

• A)to reduce her income tax liability.
• B)to increase her net income on the financial statement.
• C)to retain the cash for reinvestment in the business.
• D)to make the business more attractive to a buyer.

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Definitions:

Accruals

Accounting adjustments for revenues that have been earned but not yet received, or expenses that have been incurred but not yet paid.

EBITDA Coverage Ratio

A financial ratio that measures a company's ability to pay off its operating expenses and debts with its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Debt Ratio

A financial ratio that compares a company’s total debt to its total assets, indicating the proportion of a company's assets that are financed by debt.

TIE Ratio

The times interest earned ratio, a financial metric measuring a company's ability to meet its debt obligations based on its current income.