A Services Firm Does All Its Business in Cash Only

question 58

Multiple Choice

A services firm does all its business in cash only. The firm projects a cash balance of $4,000 in its account after all taxes and costs are paid. The owners plan to invest $7,000 and pay a dividend of $1,000. How much net new financing is needed?

• A) $4,000
• B) $5,000
• C) $6,000
• D) $7,000

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Definitions:

Social Security

A government program that provides financial assistance to people with insufficient or no income, especially the elderly, disabled, and unemployed.

Medicare

A federal health insurance program in the United States for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.

Federal Unemployment Taxes

Taxes paid by employers to fund the federal government's oversight of the state's unemployment compensation programs.

Withhold

To deduct or hold back a portion of something, such as taxes from a paycheck.