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3 years ago

Evaluating and rewarding managers based on absorption basis income can lead to overproduction. true or false

Business

1 answer:

nikklg [1K]3 years ago

5 0

Answer:

True

Explanation:

The absorption basis of income, profits are always high when the production is greater than income because more fixed costs will have been deferred in closing inventory.

So, managers will focus more on increasing production which create huge balances of closing stocks and consequently results in large profits.

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Suppose that you just paid $76,000 for a security that will make its first payment to you in 7 years from today. It will continu

iogann1982 [59]

Answer:

$5,346.98

Explanation:

Initial cash flow = 76,000

Discount rate = 5%

Suppose the C.F. in the 7th year is x which will flow till perpetuity

Present value of annual cash flow till perpetuity = Annual cash flow / Discount rate

PV at the 7th year = x/0.05

Discount factor = (1 + r)^n

Discount rate = 5%

Years D. factor Cash flows

0 0 76,000

1 0.952381 -

2 0.907029 -

3 0.863838 -

4 0.822702 -

5 0.783526 -

6 0.746215 -

7 0.710681 x/0.05

So, 76000 = 0.710681 *(x/0.05)

76000 / 0.710681 = x / 0.05

x = 76000 / 0.710681 * 0.05

x = 5346.98408990813

x = 5346.98

Hence, if the interest rate is 5%, $5346.98 will be received annually from the 7th year

7 0

3 years ago

Equipment loans are often tied to all of the following except:

vichka [17]

<span>The correct answer is C. Equipment loans are not usually tied to the redevelopment of the business real estate in any way. Equipment and real estate are two distinct classes of business assets. An equipment loan would, however, be tired to the equipment itself as the nature of the equipment would determine the amount of the loan. The equipment would also usually serve as collateral on the loan. The financial position of the borrow and the business's overall cash flow (but mainly its operating cash flow) would also be tied to the equipment loan in that these items would help the bank assess the risk of the loan and therefore determine the interest rate and terms of the loan.</span>

4 0

2 years ago

The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.9 million in long-term debt, $770,000 in the common stock account

Naddika [18.5K]

Answer:

OCF = -$1,670,000

Explanation:

To calculate this, the following are first calculated:

Cash flow to creditors = Interest expense - (Long-term debt in 2009 - Long-term debt in 2008) = $230,000 – (3,500,000 – 2,900,000) = -$370,000

Cash flow to stockholders = Dividends paid – ((Common stock in 2009 + Additional paid-in surplus in 2009) - (Common stock in 2008 + Additional paid-in surplus in 2008)) = $550,000 – (($985,000 + $8,250,000) – ($770,000 + $6,000,000)) = -$1,915,000

Cash flow from assets = Cash flow to creditors + Cash flow to stockholders = -$370,000 - $1,915,000 = $2,285,000

The the firm's 2009 operating cash flow, or OCF can now be calculated as follows:

Cash flow from assets = OCF - Net working capital investment - Net capital spending

-$2,285,000 = OCF - (-$165,000) - $780,000

-$2,285,000 = OCF + $165,000 - $780,000

OCF = -$2,285,000 - $165,000 + $780,000 = -$1,670,000

3 0

2 years ago

Which of the following costs is often important in decision making, but is omitted from conventional accounting records? A. Fixe

-Dominant- [34]

The correct option is B - Opportunity Cost

<u>Explanation:</u>

Generally, an opportunity cost is the benefit that you gave up when you pass on that option in favor of another option. For instance, by choosing to purchase furniture instead of taking a vacation comes at the cost of not experiencing the relaxation and fun associated with a vacation. All options have opportunity costs (getting married instead of staying single, investing in school instead of retirement, etc).

Everyone should know that opportunity cost is a very important concept that doesn’t just have its application in economics; you can apply it to all aspects of your daily life. Whether you’re cooking, eating, playing soccer, going to the movies, or hitting the gym, so long as you’re breathing, evaluating the choices you’re presented with is an inevitability, whether conscious of it or not.

8 0

2 years ago

In January 2016, currency held by individuals and businesses and traveler's checks was $1,347 billion; checkable deposits ow

Zielflug [23.3K]

Answer:

$M_1 = $3111$

$M_2 = $12409$

Explanation:

Given data:

Amount of currency held = $1347 billion

checkable deposit $1347 billion

saving deposit $8189 billion

small time deposit $400 billion

market fund $709 billion

Saving deposit in the form M2 and M1

M_1 = currency held as individual and traveller check + checkable deposit

= $1347 + $1764

$M_1 = $3111$

M_2 = M_1 + saving deposit _ time deposit + maket funds

= $3111 + $8189 + $400 + $709

$M_2 = $12409$

3 0

2 years ago