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3 Cards in this Set
- Front
- Back
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The CFO of Mulroney Brothers has suggested that the company should issue $300 million worth of common stock and use the proceeds to reduce some of the company’s outstanding debt. Assume that the company adopts this policy, and that total assets and operating income (EBIT) remain the same. The company’s tax rate will also remain the same. Which of the following will occur?
a. The company’s net income will increase. b. The company’s taxable income will fall. c. The company will pay less in taxes. d. Statements b and c are correct. e. All of the statements above are correct. |
a. The company's net income will increase
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On its 2001 balance sheet, Sherman Books had retained earnings equal to $510 million. On its 2002 balance sheet, retained earnings were also equal to $510 million. Which of the following statements is most correct?
a. The company must have had net income equal to zero in 2002. b. The company did not pay dividends in 2002. c. If the company’s net income in 2002 was $200 million, dividends paid must have also equaled $200 million. d. If the company lost money in 2002, they must have paid dividends. e. None of the statements above is correct. |
c. If the company' net income in 2002 was $200 million, dividends paid must have also equaled $200 million.
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All else equal, which of the following actions will increase the amount of cash on a company’s balance sheet?
a. The company issues new common stock. b. The company repurchases common stock. c. The company pays a dividend. d. The company purchases a new piece of equipment. e. All of the statements above are correct. |
a. The company issues new common stock
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