What is one potential impact of tax reforms on small businesses? a)Increased compliance costs b) Decreased access to capital c) Reducedcompetition d) Expansion of market reach

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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the effects of increasing the amount paid upfront when corporations make capital purchases with a focus on the benefits and the drawbacks.
Which of the following statements is CORRECT? * Assume a corporation has less debt than what is ideal. Increasing the use of debt to reach its optimum capital structure would lower the cost of both debt and equity financing. There is no reason to believe that changes in the personal tax rate will have an effect on firms' capital structure decisions. Assuming everything else is equal, a firm with high business risk is more likely to increase the use of financial leverage than a firm with low business risk. In general, a company with low operating leverage has a small percentage of its total costs in the form of fixed costs. If a company's after-tax cost of equity exceeds its after-tax cost of debt, it can still lower its WACC by using more debt.
If the present value of a firm's marginal financial distress costs are equal to the present value of its marginal tax shieid, the companySelect one:a.has too much debt in its capital structureb.should increase the amount of debt in ts capital structurec. has an optimal capital structured.shouid reduce the amount of equity in its capital structuree:none of the abovt
Debate Over Allowing Big Businesses to Lower Tax Overheads The question of whether big businesses should be permitted to lower their tax overheads is a contentious issue that touches upon economic, social, and ethical considerations. Advocates argue that businesses have a fiduciary responsibility to their shareholders to maximize profits legally. Employing tax planning strategies to minimize tax liabilities allows businesses to retain more earnings, which can be reinvested into the company for expansion, innovation, and job creation. Additionally, proponents contend that tax incentives and deductions provided by governments are designed to encourage investment and economic growth, and businesses have the right to take advantage of these incentives within the confines of the law. On the other hand, critics argue that allowing big businesses to lower their tax overheads through aggressive tax avoidance measures can have detrimental effects on society. Such practices can exacerbate income…
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True or false: the new revenue recognition standard is aimed at a few industries and will not affect most companies
4. Which of the below statements is false about the Static Tax Clientele Theory of payout policy? Investors with high capital gains tax relative to marginal income tax prefer cash dividends An individual company cannot increase its value by changing its payout policy Companies with high dividend payout rates attract investors with relatively low tax rates There is a static equilibrium where companies with low dividend payout rates attract investors with relatively high tax rates None of the above
4. Classify each of the following factors/cases based on whether they favor a low dividend policy or high dividend policy? (explain why) A. The tax on capital gains is deferred until the gain is realized. B. Few, if any, positive net present value projects are available to a firm. C. A majority of the shareholders have a low tax rate. D. A majority of the shareholders have better investment opportunities than the firm. E The presence of an agency conflict with the company's senior managers.
What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?
How much interest rate is considered favorable for businesses in lending investment capital
Under the trade-off theory, lowering the corporate tax rate will incentivize companies to increase the ratio of debt in their capital structure. Question options: a) True b) False

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What is one potential impact of tax reforms on small businesses? a) Increased compliance costs b) Decreased access to capital c) Reduced competition d) Expansion of market reach