Hot, Inc'S Primary Competitor Is Cold, Inc

question 21

Multiple Choice

Hot, Inc.'s primary competitor is Cold, Inc. When comparing relative deferred tax asset and liability accounts with Cold, which of the following benchmarking activities should Hot undertake?

• A) Scale the deferred tax assets and liabilities by total sales or total assets.
• B) Compare raw dollar amounts of deferred tax assets and liabilities.
• C) Ignore deferred tax assets and liabilities and focus on overall effective tax rate.
• D) Ignore all tax information other than the current tax expense.

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Definitions:

Required Reserve Ratio

The proportion of depositors' balances banks must have on hand as cash, mandated by the central bank.

Excess Reserves

The reserves held by banks that are greater than the minimum amounts required by regulators, which can be lent out or invested.

Checkable Deposits

Bank account balances that can be withdrawn on demand using checks or electronic methods.

Money Supply

Refers to the total amount of money available in an economy at a particular point in time, including cash and deposits.