Salinger Software Was Founded in 2010 The Company Has No Debt, So Operating Income Equals Earnings

question 5

Multiple Choice

Salinger Software was founded in 2010. The company lost money each of its first three years, but was able to turn a profit in 2013. Salinger's operating income (EBIT) for its first four years of operations is reported below. $$\begin{array} { l r } \text { Year } & \text { EBIT } \\2010 & - \$ 50,000,000 \\2011 & - \$ 150,000,000 \\2012 & - \$ 100,000,000 \\2013 & \$ 700,000,000\end{array}$$ The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2010. How much tax did the company pay in 2013?

• A) $114,030,875
• B) $120,032,500
• C) $126,350,000
• D) $133,000,000
• E) $140,000,000

Recognize how and where different types of financial statement items, such as losses on disposal and changes in accounting methods, are reported.

Describe the purpose of an audit and the requirements of the Sarbanes-Oxley Act for corporate accountability.

Calculate and understand financial ratios such as price-earnings ratio, return on stockholders' equity, and return on total assets.

Identify what constitutes an unusual item on an income statement and the implications of various unusual items.

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Definitions:

Creativity

The ability to produce original, innovative ideas or solve problems in unique ways.

Extraversion

A personality trait characterized by outgoingness, high energy, and an enjoyment of social interaction.

Prejudice

The display of negative, irrational, and superior opinions and attitudes toward persons who are different from ourselves.

Superior Opinions

Refers to the judgments or viewpoints held by individuals in higher positions within an organization or hierarchy.