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:

Input

Resources used in the process of production, including raw materials, labor, and capital.

Marginal Revenue Product

The additional revenue generated from using one more unit of input.

Marginal Product

The extra output generated from increasing a particular input by one unit while keeping all other inputs unchanged.

Output

The total amount of goods or services produced by a firm or economy over a specific period of time.