Q-1 What four financial statements are contained in most annual reports?
Q-3 If a “typical” firm reports $20 million of retained earnings on its balance sheet, could its
directors declare a $20 million cash dividend without having any qualms about what they
were doing? Explain your answer.
Q-4 Explain the following statement: While the balance sheet can be thought of as a snapshot of a firm’s financial position at a time, the income statement reports on operations over a period of time.
Q-5 Financial statements are based on generally accepted accounting principles (GAAP) and are audited by CPA firms. Therefore, do investors need to worry about the validity of those statements? Explain your answer.
Q-9 What does double taxation of corporate income mean? Could income ever be subject to triple taxation? Explain your answer.
Q-10 How does the deductibility of interest and dividends by the paying corporation affect the choice of financing (that is, the use of debt versus equity?)