Which of the Following Would Be Most Likely to Occur

question 125

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 were not affected,and assume that the same depreciation method was 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:

Business Risk

The exposure to factors that may cause a business to experience lower profits or financial loss, including market competition, regulatory changes, and operational failures.

Endowment Management

The process of overseeing and making investment decisions for an endowment fund to ensure its ability to support a particular organization or cause over time.

Bookkeeping

The practice of recording all financial transactions, ensuring accuracy and completeness in the financial records of an organization.

Accrual Basis Accounting

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.