108. What is the change in cash for a firm with the following: $10,000 cash flow from
operations, $1,600 cash used for new investment, a reduction in the level of debt of $2,000,
$1,000 in cash dividends, and $200 in depreciation expense?
109. What are the average and marginal tax rates for a corporation that has $97,648 of taxable
income? The tax rates are as follows:
110. Which one of these will increase a firm’s cash balance?
111. You are the sole shareholder of Taylor’s. Assume you pay personal taxes as a single
taxpayer and the tax rates are as shown here:
a) If you take an annual salary of $60,000, the firm will have taxable income of $34,000. What
would be the combined amount of corporate and personal tax due?
b) If you reduce your annual salary to $40,000, the firm will have taxable income of $58,000 once
your salary reduction is adjusted by a factor of 1.2 to account for employment taxes and other
salary-related effects. What would be the combined amount of corporate and personal tax due in
this situation if the firm also paid you a $20,000 dividend?
c) Explain how marginal tax rates and “double taxation” can affect the method of compensation
you should select and how the ideal method of compensation can be ascertained.
112. If depreciation is a method of allocating cost rather than an actual cash flow, discuss how
depreciation impacts the income statement and overall cash flows.
113. Discuss reasons why a market-value balance sheet may be distinctly different from a
book-value balance sheet.
114. Why might it be difficult to rely on profits to get an overall impression of the firm’s cash
flows?
115. Discuss the premise of accrual accounting. Why is it considered preferable over cash–
basis accounting?
116. Congress passed the Sarbanes-Oxley Act in 2001. The act attempts to ensure that the
firm’s financial reports accurately represent its financial condition. However, the general
consensus is that accounting rules still give firms considerable leeway when preparing their
financial statements. List three examples of gray areas that allow for judgment calls.
117. Describe the practice of double taxation of corporate earnings in the United States.
118. Why should corporate financial managers be concerned about the taxation of interest,
dividends, or capital gains since these are taxed at the personal level?
119. Describe the information contained in the balance sheet, income statement, and
statement of cash flows.
120. Why does accounting income differ from cash flow?
121. A firm spends $200 to produce goods in period 1. In period 2, it sells half of those goods
for $150, but doesn’t collect payment until one period later. In period 3, it sells the other half of
the goods for $150, and collects on these sales in period 4. Construct tables that depict the
derivation of the profits and cash flows for the firm for periods 1 through 4. Ignore taxes.