13: PORTFOLIO/ACCOUNT ANALYSIS (219)

Question 1

T/F: With a progressive tax, such as income and estate taxes, the percentage amount increases as the taxable amount increases

Answer 1

True

Question 2

T/F: With a progressive tax, such as income and estate taxes, the percentage amount increases as the taxable amount increases

Answer 2

True

Question 3

T/F: Sales and cigarette taxes are regressive because everyone pays the same percentage tax regardless of their income.

Answer 3

True

Question 4

In what situations is pretax income after all expenses including interest?

Answer 4

Always,

Pretax income is always after all expenses

Question 5

When a customer redeems shares without designating which shares to redeem and the IRS uses FIFO, what is the negative tax consquence of this?

Answer 5

It will probably result in redeeming shares w/ the lowest cost basis first, meaning a greater taxable gain

Question 6

Define “Leverage” when talking about how levereged a company is

Answer 6

The use of investors’ money at a fixed cost to benefit the common shareholders.

Question 7

Does issuing preferred stock and bonds increase a company’s leverage?

Answer 7

Yes
Both preferred stock and bonds are fixed-rate issues. Therefore, issuing more preferred stock or bonds increases the leverage of the common stockholders.

Question 8

T/F: Pretax income is always after all expenses, including interest

Answer 8

True