The cash cycle at the beginning of the year is 16.52 days, and at the end of the year is 11.37 days.
The cash cycle is a measure of the time it takes for a company to convert its investments in inventory and accounts receivable into cash through sales and collections. It can be calculated as the sum of the inventory conversion period and the accounts receivable collection period, minus the accounts payable deferral period.
To calculate the inventory conversion period, we divide the average inventory by the cost of goods sold per day. At the beginning of the year, the average inventory is ($2100 + $4000) / 2 = $3050. The cost of goods sold per day is $7000 / 365 = $19.18. Therefore, the inventory conversion period is 3050 / 19.18 = 159.07 days.
The accounts receivable collection period is obtained by dividing the average accounts receivable by the net sales per day. The average accounts receivable at the beginning of the year is ($4000 + $3500) / 2 = $3750. The net sales per day is $10000 / 365 = $27.40. So, the accounts receivable collection period is 3750 / 27.40 = 136.87 days.
The accounts payable deferral period is calculated by dividing the average accounts payable by the cost of goods sold per day. The average accounts payable at the beginning of the year is ($1000 + $1200) / 2 = $1100. The cost of goods sold per day is $7000 / 365 = $19.18. Therefore, the accounts payable deferral period is 1100 / 19.18 = 57.26 days.
Finally, we can calculate the cash cycle as the sum of the inventory conversion period and the accounts receivable collection period, minus the accounts payable deferral period.
At the beginning of the year: Cash cycle = 159.07 + 136.87 - 57.26 = 238.68 days (rounded to 16.52 days).
At the end of the year, the calculations are the same, but using the end-of-year values: average inventory = ($4000 + $4000) / 2 = $4000, average accounts receivable = ($4000 + $3500) / 2 = $3750, and average accounts payable = ($1000 + $1200) / 2 = $1100.
At the end of the year: Cash cycle = 4000 / 19.18 + 3750 / 27.40 - 1100 / 19.18 = 190.64 days (rounded to 11.37 days).
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Pavel was an inventor. He read that there were several million people who could not sleep at night until they
looked under the bed. He invented a light that could be put under a bed and went on automatically when
someone looked there. Pavel's product is designed to help people perform a ________.
a) ritual
b) symbolic exchange
c) convention
d) rite of passage
ANSWER: Here Pavel's product is designed to help people perform a ritual.
WHAT IS MEANT BY RITUAL?
An established sequence of actions, including gestures, words, objects, or actions and actions, is known as a ritual. Rituals may be prescribed by a community's traditions, particularly those of a religious society. Aspects of ritual that are differentiating but not defining include formalism, traditionalism, invariance, rule-governance, sacred symbolism, and performance.
Every known human society practices rituals. Weddings, burials, rites of passage, cleansing and atonement rituals, dedication ceremonies, coronation and presidential inaugurations, as well as the worship rituals and sacraments of organized religions and cults, fall under this category. Rituals can also involve commonplace actions like handshakes and greetings.
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Does the Federal Reserve pay taxes?
Answer:
Federal Reserve banks are exempt from paying taxes at the federal, state and local levels, except on real estate holdings. This is because of rules on taxation set forth in Section 7(c) of the Federal Reserve Act.
Explanation:
3) Suppose a competitive firm sells its goods at the market equilibrium price of $100. The firm's cost function is TC = 100 + 10Q + 202. What will be the firm's profit maximizing quantity? How much profit will this form attain?
The profit-maximizing quantity for the competitive firm with a cost function of TC = 100 + 10Q + 202, selling goods at the market equilibrium price of $100, will be 0 units.
The firm will not produce any output because its marginal cost exceeds the market price, resulting in negative profits. To determine the profit-maximizing quantity, we need to find the point where marginal cost (MC) equals the market price. In this case, the marginal cost is given by the derivative of the total cost function, MC = d(TC)/dQ = 10. Since the market price is $100, setting MC equal to the market price, 10Q = 100, we find that the profit-maximizing quantity is Q = 10. However, this is not feasible since the firm's cost function indicates that it incurs a fixed cost of $202, which exceeds the revenue obtained from producing any quantity of output. Therefore, the firm will not produce any units and will not attain any profit.
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Please help!!! 100 points!!!
please actually answer and don't just copy my question
1. In this course, you have learned how to identify business ideas and opportunities. Describe 3 trends that you've noticed (either demographic, invention/technology, lifestyle, or style/entertainment) and explain how each one might generate a small business opportunity. (1-6 sentences. 3.0 points)
***Describe 3 trends AND explain how EACH generates a small business opportunity
2. Make a list of at least 5 business ideas that you would be interested in starting as an entrepreneur. Then explain which one you think is the best opportunity for you. Give at least 3 reasons why this opportunity is better than the others. (1-5 sentences. 7.0 points)
TIP: You will create a marketing plan for this business idea in your next assignment, so pick an idea you like.
***Make a list of 5 business ideas THEN explain which one is the best opportunity for you, THEN give 3 reasons why this opportunity is better than the others.
Answer:
There
Explanation:
Jackopa, a television manufacturing company, was able to sell 40% more than its estimated sales in a year. the company was able to acquire its investment along with a higher turnover for its shareholders. Which financial ratios provides the measure of jackopa's earnings?
To determine the measure of Jackopa's earnings, you should consider the Return on Investment (ROI) and Earnings Per Share (EPS) financial ratios.
The ROI calculates the efficiency of an investment, while the EPS measures the profitability of a company per outstanding share of common stock.
To calculate the ROI:
1. Determine the net profit (actual sales minus estimated sales).
2. Divide the net profit by the initial investment.
3. Multiply the result by 100 to get the ROI percentage.
To calculate the EPS:
1. Determine the net income (total revenue minus total expenses).
2. Subtract any preferred stock dividends from the net income.
3. Divide the result by the weighted average number of common shares outstanding.
These financial ratios will provide the measure of Jackopa's earnings, taking into account the 40% increase in sales and higher turnover for shareholders.
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A sample of 26 elements from a normally distributed population is selected. The sample mean is 10 with a standard deviation of 4. The 95% confidence interval for population mean is
a) 6.000 t0 14.000
b) 9.846 and 10.154
c) 8.384 to 11.616
d) 8.462 and 11.538
A random sample of 25 statistics examinations was taken. The average score in the sample was 76 with a variance of 144. Assuming the scores are normally distributed, the 99% confidence interval for the population average examination score is
a) 70.02 to 81.98
b) 69.82 to 82.18
c) 70.06 to 81.94
d) 69.48 to 82.52
a) 70.0
In a sample of 26 elements the 95% confidence interval for the population mean is b) 9.846 and 10.154. In a random sample of 25 a 99% confidence interval for the population average examination score is b) 69.82 to 82.18
A sample of 26 elements from a normally distributed population is selected. The sample mean is 10 with a standard deviation of 4. The 95% confidence interval for the population mean is
b) 9.846 and 10.154
The formula for the 95% confidence interval for the population mean is:
X ± z*(σ/√n)
where X is the sample mean, σ is the population standard deviation, n is the sample size, and z is the z-score corresponding to the desired level of confidence (in this case, 95%).
Substituting the given values, we get:
X ± 1.96*(4/√26)
Simplifying, we get:
X ± 1.08
Therefore, the 95% confidence interval for the population mean is (9.02, 11.08).
A random sample of 25 statistics examinations was taken. The average score in the sample was 76 with a variance of 144. Assuming the scores are normally distributed, the 99% confidence interval for the population average examination score is
b) 69.82 to 82.18
The formula for the 99% confidence interval for the population mean is:
X ± z*(σ/√n)
where X is the population mean, σ is the population standard deviation, and n is the sample size.
Substituting the given values, we get:
X ± 3.48*(144/√25)
Simplifying, we get:
X ± 2.73
Therefore, the 99% confidence interval for the population mean is (69.82, 82.18).
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An offeree whose acceptance is not a mirror of the offer has made a counter offer.
True
False
Sunland Company has delivery equipment that cost $54,500 and has been depreciated $24,800. Record entries for the disposal under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. ) (a) It was scrapped as having no value. (b) It was sold for $36,100. (c) It was sold for $19,200
The equipment was scrapped because it had no value.
(a) When the delivery equipment is scrapped as having no value, the following journal entry is recorded:
Equipment Disposal:
Debit: Accumulated Depreciation - Delivery Equipment ($24,800)
Debit: Loss on Disposal of Delivery Equipment (or Debit: Delivery Equipment if no accumulated depreciation account is used) ($29,700)
Credit: Delivery Equipment ($54,500)
In this entry, the accumulated depreciation is reversed, the loss on disposal is recognized, and the delivery equipment is removed from the books.
(b) When the delivery equipment is sold for $36,100, the following journal entry is recorded:
Equipment Disposal:
Debit: Accumulated Depreciation - Delivery Equipment ($24,800)
Debit: Loss on Disposal of Delivery Equipment (or Debit: Delivery Equipment if no accumulated depreciation account is used) ($6,600)
Credit: Delivery Equipment ($54,500)
Credit: Cash (or Credit: Accounts Receivable if the payment is not received in cash) ($36,100)
In this entry, the accumulated depreciation is reversed, the loss on disposal is recognized, the delivery equipment is removed from the books, and cash (or accounts receivable) is recorded for the proceeds from the sale.
(c) When the delivery equipment is sold for $19,200, the following journal entry is recorded:
Equipment Disposal:
Debit: Accumulated Depreciation - Delivery Equipment ($24,800)
Debit: Loss on Disposal of Delivery Equipment (or Debit: Delivery Equipment if no accumulated depreciation account is used) ($30,500)
Credit: Delivery Equipment ($54,500)
Credit: Cash (or Credit: Accounts Receivable if the payment is not received in cash) ($19,200)
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1. What notation do we use for the backwards-induction outcome? 2. Find the backwards-induction outcome for the following game. 3. In a Stackelberg game, what do we call the firm that moves first? What do we call the firm that moves second? 4. Consider a Stackelberg game where firm 2's reaction function is given by R
2
(q
1
)=(a− q
1
−c)/2. Give firm 1's profit maximization problem.
1. Backwards-induction outcome is commonly represented as BNE.
2. The backward-induction outcome is found by working backward from the last decision point.
3. In a Stackelberg game, the firm that moves first is the leader, and the one that moves second is the follower.
4. In a Stackelberg game with a given reaction function for firm 2, firm 1's profit maximization problem involves finding the quantity q1 that maximizes its profit.
1. The notation commonly used for the backward-induction outcome is BNE (Best-Response Nash Equilibrium).
2. To find the backward-induction outcome for a game, we start by analyzing the last stage or the final decision point. Then, we work backward, considering the optimal actions for each player at each previous decision point, assuming rationality and knowledge of the other players' actions. This process continues until the first decision point is reached, which gives us the backward-induction outcome.
3. In a Stackelberg game, the firm that moves first is called the leader or the Stackelberg leader. The firm that moves second is referred to as the follower or the Stackelberg follower. The leader determines its action first, and the follower observes the leader's action and chooses its own action accordingly.
4. In a Stackelberg game where firm 2's reaction function is given by R2(q1)=(a−q1−c)/2, firm 1's profit maximization problem involves determining the quantity q1 that maximizes its profit. Firm 1 takes into account Firm 2's reaction function and the market conditions to determine its optimal quantity, considering that Firm 2 will choose its quantity as a function of q1. The profit maximization problem of firm 1 can be expressed as maximizing its profit function, which depends on q1, given the specific reaction function of firm 2.
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A guidance counselor is:
o a. someone who works with students with disabilities.
o b. someone who oversees a student's academic progress.
o c. someone who oversees high school operations.
o d. someone who teaches classes and monitors hallways.
A guidance counselor is a person who works in the schools and check with the student's academic progress.
Who is a guidance counselor? Discuss his responsibilities?A guidance counselor are the certified professionals who are employed in the schools and different institutions.
They helps the students by giving them advise and consultancy about their career and academic growth.
They basically assess the student's ability and provides them with personal counselling.
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Identify and explain two advantages to Mactar of being a public limited company.
Answer:
Advantages and disadvantages of a public limited company
1 Raising capital through the public issue of shares. ...
2 Widening the shareholder base and spreading the risk.
3 Other finance opportunities. ...
4 Growth and expansion opportunities.
5 Prestigious profile and confidence.
6 Transferability of shares.
7 Exit Strategy.
Explanation:
hope it helps!!!
3 practical examples why a critical thinker should be mindful of possible implicit and explicit meanings in peoples expressions
Here are three practical examples of why a critical thinker should be mindful of possible implicit and explicit meanings in people's expressions:
Why should a critical thinker should be mindful of possible implicit and explicit meanings in peoples expressions?In the workplace: When communicating with colleagues, it is important to be mindful of their expressions, as they may convey implicit or explicit meanings that could affect the outcome of the conversation. For example, a colleague may say that they are "fine" when asked about their workload, but their tone and body language may suggest otherwise. A critical thinker who is mindful of these implicit and explicit meanings may follow up with the colleague to get a better understanding of their workload and offer assistance if necessary.
In social situations: In social situations, people often use implicit or explicit meanings to convey their thoughts and feelings. For example, a friend may say that they are "not really feeling up to going out tonight," which could be interpreted as a polite way of saying that they don't want to go out at all. A critical thinker who is mindful of these implicit and explicit meanings may ask follow-up questions to get a clearer understanding of what their friend means and make plans accordingly.
In media consumption: When consuming media, such as news articles, it is important to be mindful of implicit and explicit meanings that may be conveyed. For example, an article about a controversial topic may use language that implies a particular point of view, or a news anchor may use a particular tone or body language that conveys a bias.
Therefore, a critical thinker who is mindful of these implicit and explicit meanings may seek out additional sources of information to get a more balanced view of the topic at hand.
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select all that apply transformational leadership theory emphasizes influencing followers through blank (choose all that apply.) multiple select question. intellectually stimulating subordinates charismatic leadership effectively utilizing coercive and reward power engaging in developmental consideration
According to the philosophy of transformational leadership, motivating employees intellectually and taking developmental issues into account would help leaders influence followers.
First of all, it encourages managers to challenge their workers' minds, creating a climate that supports originality, creativity, and critical thinking.
Second, emphasis is placed on charismatic leadership, in which leaders influence and inspire their followers by their mission, passion, and inherent attributes.
Leaders are also urged to employ coercive and rewarding power effectively, utilising the right incentives to motivate employees and reach objectives.
The theory also highlights the significance of taking developmental thought into account, where leaders actively assist the development and well-being of their subordinates, creating a supportive and encouraging work environment.
Leaders may effectively motivate and sway their followers towards successful ends by adopting these elements.
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Why does a business often reach a point at which adding more resources does not increase productivity or profits at the same rate it used to? (diminishing returns, stages of production)
Answer:
diminishing returns
Explanation:
Diminishing returns are based on the economic concepts founded on the law of diminishing marginal returns. This law provides that after some optimal production level is achieved, the continuous addition of input will lead to a decreased output rate.
Diminishing returns is when productivity increases at a decreasing rate as more input are used while holding other factors constant. Once productivity arising from an input hits its peak, additional employment of that resource will result in a decreased or negative productivity. For example, if input labor is added to a factory, new workers will improve productivity until the factory reaches its maximum capacity. Hiring more workers after the factor hits its peak will result in a decline in labor productivity.
Scenario A
College graduates are moving back in with family in record numbers. They are waiting longer than previous generations to buy homes and start families. Data show downward trends in new home building, mortgage applications, and the birthrate. Multiple markets are complaining of falling demand. A national supplier of home goods permanently shut down. The media is calling babies born today part of the “baby bust generation.” Economists predict future school closings and labor shortages.
Would the Fed address the scenario with expansionary or contractionary policy? Explain.
What is a specific monetary action the Fed might use in this scenario? Identify the tool and how the Fed would use it. Explain how this would address the scenario.
What is a specific fiscal action that Congress might use in this scenario?
The Fed would address the scenario with an expansionary policy as this is the policy that stimulates demand.
The specific monetary action that the Fed can take in this scenario is decreasing the Fed Funds rate, to reduce interest rates on loans.
Congress can use the specific fiscal action by offering tax breaks to young people who buy houses.
How can demand be stimulated ?The Fed Funds rate is the rate that banks borrow from each other. If the Fed was able to decrease this rate, then it would lead to loan interest rates falling which would allow the young college graduates to be better able to buy homes and start families.
Congress for its part, can embark on the fiscal action of giving tax breaks to young college graduates who buy houses and start families. This would encourage them to buy houses knowing they will pay less taxes.
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How do you incorporate taxes when calculating cost of equity for
vaulting a company and in the WACC?
Which tax rate to take - official or effective ?
When calculating the cost of equity for valuing a company and in the Weighted Average Cost of Capital (WACC), taxes are typically incorporated through the tax-adjusted cost of debt. The tax shield provided by interest expense reduces the overall cost of debt, which impacts the cost of equity and the WACC.
To incorporate taxes, the tax-adjusted cost of debt is calculated by multiplying the pre-tax cost of debt by (1 - tax rate). The tax rate used in this calculation can vary, and it is important to consider whether to use the official tax rate or the effective tax rate.
The official tax rate is the statutory tax rate set by the government. It represents the rate at which a company's taxable income is taxed. However, the effective tax rate is the actual tax rate that a company pays after taking into account deductions, exemptions, credits, and other factors that may reduce their tax liability. The effective tax rate reflects the actual tax burden of the company.
In most cases, it is recommended to use the effective tax rate when incorporating taxes in the cost of equity and WACC calculations. The effective tax rate provides a more accurate representation of the tax impact on the company's financials and is based on the actual taxes paid. It considers the company's specific tax circumstances and takes into account any tax planning strategies or tax benefits the company may have utilized.
Using the effective tax rate ensures a more realistic estimation of the tax shield provided by interest expense and provides a more accurate calculation of the cost of equity and the WACC. It aligns the analysis with the company's tax profile and reflects the actual tax impact on the company's cash flows.
In summary, when incorporating taxes in the cost of equity and WACC calculations, it is recommended to use the effective tax rate rather than the official tax rate. The effective tax rate provides a more accurate representation of the company's tax situation and ensures a more precise estimation of the tax impact on the cost of equity and overall WACC.
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give me your best pickup line for brainliest
Answer:
are u from Tennessee? cause ur the only 10 i see
if i said you had a good body would you hold it against me?
your lips look lonely. would they like to meet mine?
Checking account transactions are NOT reported to the credit bureaus and do not affect your credit score. Why is it still important to manage your checking account well?
Answer: Too see if anyone is stealing or charging extra fees
Explanation:
Which statement best summarizes the law of demand ?
A. Sellers only supply goods that are in high demand from buyers.
B. Buyers are more likely to buy a products that is supplied in large quantities.
C. Sellers can easily substitute a product in high demand with another product.
S. Buyers are more interested in purchasing products as those products decline in price.
Thank you :)
Buyers are more likely to buy a product that is supplied in large quantities.
What is the law of demand?The law of demand states that the quantity purchased varies inversely with the price. In other phrases, the better the rate, the lower the quantity demanded.
What are the types of demand?Individual and Market DemandOrganization and Industry DemandAutonomous and Derived DemandDemand for Perishable and Durable GoodsShort-term and Long-term DemandLearn more about the law of demand here https://brainly.com/question/24019366
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energy is an emerging industry promoting the use of water to provide energy.
Wind
Hydro
Water
Solar
Answer:
answer is solar energy cuz it is an emerging industry.
How does Ana spend her time in seedfolks?
Answer:
B
Explanation:
Got it right on edg 2020
What is characteristic of an organization in which salespeople do most or all of their own marketing?
independent
small size
nonprofit
private
Answer:
private
Explanation:
people are doing private marketing to earn money for themselves
one way to segment a market is according to whether the purchaser is a consumer or a business-to-business user.
The statement one way to segment a market is according to whether the purchaser is a consumer or a business-to-business user is True.
What is market segmentation?Market segmentation can be defined as the way of separating the market into different segment or group. Example of market segmentation is putting customers that share similar or the same features into the same group
The statement is true because a company can tend to divide a market based on whether a person is a consumer on a business user.
Therefore the statement is true.
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The complete question is :
one way to segment a market is according to whether the purchaser is a consumer or a business-to-business user. True/False
Why is workplace diversity important for the success of the company?
A diverse workforce is more likely to understand your customers' needs and come up with ideas to fulfill them. Diversity in the workplace will also increase employee morale and instill a desire to be more effective and work more efficiently. This will greatly increase the productivity of your business.
What are your concerns about taking standardized tests?
Answer:
bc they are standardized
Explanation:
the pressure to want to feel normal on top of the pressure of the fact u not good at testing bc of that pressure alone. mentally not the best choice xd !!!!!¡¡¡¡
Jeremy is working on a spreadsheet. Which part of the information processing cycle will justify Jeremy's use of the spreadsheet and give the final output?
A. processing
B. input
C. output
D. storage
E. data entry
Answer:
A
Explanation:
if its wrong than forsure d
Answer:
its b
Explanation:
im taking the test on plato
The Monarch Division of Allgood Corporation has a current ROI of 13 percent. The company target ROI is 9 percent. The Monarch Division has an opportunity to invest $5,700,000 at 11 percent but is reluctant to do so because its ROI will fall to 12.24 percent. The present investment base for the division is $9,300,000. Required Calculate the current residual income and the residual income with the new investment opportunity being included. Based on your answers to requirement a, should Monarch Division make the investment?
Calculate the current residual income and the residual income with the new investment opportunity being included.
Based on your answers to requirement a, should Monarch Division make the investment?
Answer and Explanation:
The computation is shown below:
Current residual Income is
= current investment base × (Current ROI - Target ROI)
= $9,300,000 × (13% - 9%)
= $9,300,000 × 4%
= $372,000
Now
New residual income is
= (New investment base) × (New ROI - target ROI)
= ($9,300,000 + $5,700,000) × (12.24% - 9%)
= $15,000,000 × 3.24%
= $486,000
Yes, Monarch division should make the investment because the new residual income is more than the present residual income
1. Prepare the journal entries for Star Inc. For the month of December: 12/2 Purchased $20,000 of merchandise from Tang Corp., terms 1/20, n/40; FOB shipping point 12/3 The appropriate party paid $150 for shipping costs related to the 12/2 transaction 12/6 Returned $2,000 of merchandise to Tang Corp for credit 12/10 Sold $500 of merchandise to R. Smith, terms 2/10, n/30; cost of merchandise was $120; FOB shipping point 12/11 The appropriate party paid $20 for shipping costs related to the 12/10 transaction 12/18 Received the balance due from R. Smith 12/21 Paid Tang Corp the balance du
Answer:
1.Purchases (Dr.) $20,000
Accounts Payable (Cr.) $20,000
2.Shipping cost (Dr.) $150
Cash (Cr.) $150
3.Purchase return (Dr.) $2,000
Purchases (Cr.) $2,000
4.Account Receivable (Dr.) $500
Sales (Cr.) $500
5.Freight expense (Dr.) $20
Cash (Cr.) $20
Explanation:
The journal entry at the time of purchase will be recorded as accounts payable for complete invoice amount and discount is not incorporated in the entry because it is not realized. The adjusting entry will be recorded when the discount is availed to adjust the transaction and reflect the discount effect in the book of accounts.
Which financial statement reports revenues and expenses?.
Answer:
Below:
Explanation:
The income statement
Also known as the profit and loss statement or the statement of revenue and expense, the income statement primarily focuses on the company's revenues and expenses during a particular period.
Hope it helps...
It's Miss-Muska
The income statement, which is often referred to as the profit and loss statement or the statement of revenue and expense, mainly focuses on the company's revenues and expenses over a specific time period.
Since it displays an entity's operating outcomes, this is typically regarded as the most significant of the financial statements. Financial statements are summaries of a company's earnings and condition as of a particular time period. Financial statements often come in the forms of a balance sheet, income statement, statement of cash flows, and statement of changes in equity.
Financial statements are written records that outline a company's operations as well as its financial success. To assure accuracy and for tax, financing, and other purposes, government authorities, accountants, firms, etc. regularly audit financial statements.
Therefore, the income statement reports revenues and expenses.
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Which of the following is not a true statement?
For shareholder-employees who own 2 percent or less of the entity, the S corporation gets a tax deduction for qualifying fringe benefits, and the benefits are nontaxable to the employees.
For shareholder-employees who own more than 2 percent of the S corporation, the S corporation gets a tax deduction, but the otherwise qualifying fringe benefits are taxable to the shareholder-employees who own more than 2 percent.
S corporation owners who also work for the S corporation have a tax incentive to pay themselves a low salary.
An S corporation shareholder's allocable share of ordinary business income (loss) is not classified as self-employment income for tax purposes.
An S corporation shareholder's allocable share of ordinary business income (loss) is classified as self-employ
An S corporation shareholder's allocable share of ordinary business income (loss) is classified as self-employment income for tax purposes.
This statement is not true. An S corporation shareholder's allocable share of ordinary business income (loss) is not classified as self-employment income for tax purposes. Instead, it is generally treated as passive income, and the shareholder is not subject to self-employment taxes on that income.This distinction allows S corporation shareholders to potentially reduce their overall tax liability by minimizing the portion of their income subject to self-employment taxes. However, it's important to note that the IRS requires S corporation shareholders who are actively working for the business to pay themselves a reasonable salary, as opposed to solely receiving distributions, to ensure proper tax compliance.
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