Which of the Following Statements About Funds That a Firm

question 68

Multiple Choice

Which of the following statements about funds that a firm generates spontaneously (internally) is correct?

• A)In general, current liabilities that change naturally with changes in sales provide spontaneously generated funds.
• B)Spontaneously generated funds are funds that a firm must raise by issuing new stocks and new bonds.
• C)Notes payable, long-term bonds, and common stock provide most of the firm's spontaneously generated funds.
• D)Spontaneously generated funds tend to change at the same rate as a change in the firm's net operating income.
• E)Current liabilities that provide spontaneously generated funds require the firm's management to make conscious financing decisions.

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Definitions:

Payroll Register

A detailed record of each employee's wages, deductions, and net pay for a certain period.

Net Pay

The amount of money an employee receives after deductions such as taxes and retirement fund contributions are taken out of their gross salary.

FICA Tax Rate

The combined rate for Social Security and Medicare taxes that both employers and employees pay, based on a percentage of employees' wages.

Unemployment Taxes

Taxes that employers are required to pay to the government, which are used to fund unemployment benefits for workers who have lost their jobs.