If a Corporation Earns a Profit, How Do Owners of the Firm

question 221

Multiple Choice

If a corporation earns a profit, how do owners of the firm share in the profit?

• A)through coupon payments on that firm's bonds
• B)through dividend payments on shares of that firm's stock
• C)by selling any bonds or stocks owned and realizing a capital gain
• D)by raising the interest rate on bonds

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Definitions:

Depreciation Schedule

A table detailing the periodic depreciation expense for an asset over its useful life.

Annual Depreciation

The process of allocating the cost of a tangible asset over its useful life on a yearly basis.

Useful Service Life

The estimated period over which a fixed asset is expected to be usable by the company.

Straight-line Method

A depreciation method that allocates an equal amount of depreciation each year over the useful life of an asset.