Question

1. Which of the following statements is incorrect?

a. Earnings per share can be increased, up to a certain point, through leverage debt.

b. the debt ratio is typically expressed as a percentage.

c. An increasing debt ratio may indicate that a company is in financial distress.

d. Earnings per share is calculated using the number of preferred shares outstanding.

e. The earnings per share calculation does not consider cash flows.

2. WHich of the following statements is correct?

a. Dividends are paid on the amount of shares issued.

b. if a company has a single class of stock, it is referred to as treasury stock.

c. Any amount recieved for stock over its par value is considered additional paid in capital and is reported on the income statement.

d.Dividends affect both the income statement and the balance sheet of a company.

e.A company must have sufficient retained earnings and cash for the board of directors to declare a cash dividend.

3.Which of the following statement is incorrect?

a. Once an employee's gross wages for the year reach the wage limit for FUTA and SUTA, no additional unemployment taxes will be due for the employee during the year.

b. Both the employer and the employee "pay" FICA taxes.

c. An employee's net check is calculated by subtracting deductions, such as taxes, from an employee's gross wages

d.FICA taxes consist of social security and medicare

e.FUTA and SUTA taxes are withheld from employee's paychecks

Answer 1

1. d. Earnings per share is calculated using the number of preferred shares outstanding.

Earning per share is calculated using the number of equity shares outstanding.

2. e.A company must have sufficient retained earnings and cash for the board of directors to declare a cash dividend.

Cash dividend is declared based on retained earnings and cash availablity.

3.  e.FUTA and SUTA taxes are withheld from employee's paychecks

FUTA and SUTA are an employer-paid tax and not deducted from employee salary.