On the Statement of Cash Flows Prepared Using the Direct

question 48

Multiple Choice

On the statement of cash flows prepared using the direct method, cash paid for income taxes would be income tax expense minus

• A) an increase in income taxes payable.
• B) a decrease in income taxes payable.
• C) beginning income taxes payable.
• D) ending income taxes payable.

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Definitions:

Interest Tax Shield

The decrease in income tax liability due to the ability to deduct interest payments.

All Equity Firm

A company that is financed entirely through equity without any debt, relying solely on shareholders' funds for its operations.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is used to finance its overall operations and growth.

Coupon Rate

The annual interest rate paid by a bond's issuer to its bondholders, expressed as a percentage of the bond's face value.