If Net Taxes Are Cut,consumer

question 54

Multiple Choice

If net taxes are cut,consumer

• A) spending is not affected
• B) spending increases by the amount of the tax cut
• C) spending increases by an amount less than the full amount of the tax cut
• D) saving increases by the full amount of the tax cut
• E) spending increases by two-thirds of the amount of the tax cut and consumer saving increases by one-third of the amount of the tax cut

---

Definitions:

EPS

Earnings Per Share, a company's profit divided by its number of outstanding shares of common stock, indicating how much money each share earns.

EBIT

The measure known as Earnings Before Interest and Taxes determines a company's profit levels by excluding interest and tax-related expenses.

Financial Leverage

The use of borrowed funds with the intent to increase the return on equity.

EBIT-EPS Lines

Graphical representations that show the impact of financing choices, especially debt and equity, on a company's earnings per share (EPS) for various levels of earnings before interest and taxes (EBIT).