Which of the Following Would Be Most Likely to Occur

question 80

Multiple Choice

Which of the following would be most likely to occur in the year after Congress,in an effort to increase tax revenue,passed legislation that forced companies to depreciate equipment over longer lives? Assume that sales,other operating costs,and tax rates are not affected,and assume that the same depreciation method is used for tax and stockholder reporting purposes.

• A)Companies' after-tax operating profits would decline.
• B)Companies' physical stocks of fixed assets would increase.
• C)Companies' cash flows would increase.
• D)Companies' cash positions would decline.
• E)Companies' reported net incomes would decline.

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Definitions:

Marginal Product

The additional output generated by employing one more unit of a particular input, holding all other inputs constant.

Total Product

The overall quantity of output produced by a firm from a given quantity of inputs.

Short Run

In microeconomics, a period of time in which producers are able to change the quantities of some but not all of the resources they employ; a period in which some resources (usually plant) are fixed and some are variable.

Profits

The financial gain realized when the revenue generated from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.