Which One of the Following Statements Is Correct

question 280

Multiple Choice

Which one of the following statements is correct?

• A) The greater the volatility of EBIT, the more a firm should borrow.
• B) Firms with a large percentage of assets invested in intangibles, should borrow more than a comparable firm with a minimal investment in intangibles.
• C) A firm with a high annual depreciation write-off benefits more from leverage than a comparable firm with a low annual depreciation write-off.
• D) The static model of capital structure identifies the precise debt-equity ratio that optimizes the value of the firm.
• E) Firms with high tax rates have a greater incentive to borrow than firms with low tax rates.

Comprehend the treatment and valuation of various forms of initial investments into a partnership, including cash, equipment, buildings, accounts receivable, and property with associated mortgages or accumulated depreciation.

Interpret the implications of partnership agreements on income distributions, including the allocation of net income among partners according to agreed-upon ratios, salaries, and interest on capital.

Recognize how partner contributions and distributions, including the addition of non-monetary assets, affect the partners’ capital accounts.

Understand the concept of partnership liquidation and the situations that may lead to it.

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Definitions:

401(k) Plans

Retirement savings plans sponsored by an employer that allow employees to save and invest a portion of their paycheck before taxes are taken out.

Hourly Wage

The amount of money paid for each hour of work.

Nonexempt Employees

Workers who are entitled to receive overtime pay under the Fair Labor Standards Act (FLSA) for hours worked beyond the standard workweek.

FLSA Act

The FLSA Act, or Fair Labor Standards Act, is US legislation designed to protect workers against poor wages and excessive working hours, establishing minimum wage, overtime pay eligibility, and child labor standards.