Real Profit Is Zero When

question 22

Multiple Choice

Real profit is zero when:

• A)the interest rate is zero.
• B)the depreciation rate is high.
• C)the labour and capital markets clear.
• D)the labour and capital markets do not clear.

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Definitions:

Income Tax Allocation

The process of assigning income tax expense to various accounting periods because of temporary differences between accounting income and taxable income.

Tax Laws

Regulations imposed by governmental agencies in relation to the calculation and payment of taxes by individuals and organizations.

Deferred Tax Liability

A tax obligation that arises when there are temporary differences between the book value and the tax value of assets and liabilities.

Deferred Tax Asset

A Deferred Tax Asset arises when a company pays more tax to the government than it owes in its financial statements, which can be used to reduce tax liability in future periods.