Which of the Following Would Be Most Likely to Occur

question 23

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' reported net incomes would decline.
• B) Companies' net operating profits after taxes (NOPAT)would decline.
• C) Companies' physical stocks of fixed assets would increase.
• D) Companies' net cash flows would increase.
• E) Companies' cash positions would decline.

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Definitions:

Total Income

The sum of all earnings received by an individual or entity, usually within a specific time frame, including wages, investments, and other sources of revenue.

Highest Quintile

The top 20 percent of the population or distribution in a given set of data, often used in reference to income or wealth distribution.

Total Income

The sum of all wages, salaries, profits, interest payments, rents, and other forms of earnings received in a given period of time.

Household Income

The combined gross income of all members of a household.