Rome Corporation Is Expected Have EBIT of $2

question 18

Multiple Choice

Rome Corporation is expected have EBIT of $2.3M this year. Rome Corporation is in the 30% tax bracket, will report $175,000 in depreciation, will make $175,000 in capital expenditures, and will have no change in net working capital this year. What is Rome's FCFF?

• A) 2,300,000
• B) 1,785,000
• C) 1,960,000
• D) 1,610,000
• E) 1,435,000

Recognize and classify costs according to their behavior as either variable, fixed, or mixed.

Analyze and interpret comparative income statements for decision-making.

Understand the concept of fixed, variable, and mixed costs and their behavior as activity levels change.

Apply cost formula to predict total cost at different activity levels.

---

Definitions:

Cost of Goods Sold

Expenditures directly linked to the production process of goods a company offers for sale, including labor and materials.

Short-term Creditor

An entity or individual that lends money with the expectation of repayment within a short period, typically within a year.

Acid-test Ratio

A financial metric that measures a company's ability to pay its current liabilities with its most liquid assets, excluding inventory.

Asset Turnover

A measure of how efficiently a company uses its assets to generate sales; computed by dividing net sales by average total assets.