Answer question 2-1

rporate operating losses can be carried back to each of the preceding 2 years ons are small businesses that have the limited-liability benefits of the order to offset taxable income in those years. and carried forward for the next 20 years in S corporations corporate form of organization yet are taxed as partnerships or prop rietorships. . In the United States, tax rates are progressive-the higher one's income, the larger t . Assets such as stocks, bonds, and real estate are defined as capital assets. If a cap percentage paid in taxes. ital asset is sold for for a loss, it is called a capital loss. Assets held for more than a year provide long-ternm more than its cost, the profit is called a capital gain; if the asset is sold gains or losses. . Dividends are taxed as though they were capital gains. Personal taxes are discussed in more detail in Web Extension 2A. ONS Define each of the following terms a. Annual report; balance sheet; income statement b. Common stockholders' equity, or net worth; retained earnings c. Statement of stockholders' equity; statement of cash flows d. Depreciation; amortization; EBITDA e. Operating current assets; operating current liabilities; net operating working capita (2-1) total net operating capital f. Accounting profit; net cash flow; NOPAT; free cash flow; return on invested capi g. Market Value Added; Economic Value Added h. Progressive tax; taxable income; marginal and average tax rates i. Capital gain or loss; tax loss carryback and carryforward j. Improper accumulation; S corporation What four statements are contained in most annual reports? If a "typical" firm reports $20 million of retained earnings on its balance sheet, can firm definitely pay a $20 million cash dividend? Explain the following statement: "Whereas the balance sheet can be thought of as a snapshot of the firm's financial position at a point in time, the income statement re on operations over a period of time (2-2) 12-3) (2-4) 2-5) (2-6) What is operating capital, and why is it important? Explain the difference between NOPAT and net income. Which is a better measure performance of a company's operations? 2-7) What is free cash flow? Why is it the most important measure of cash flo (2-8 f you were starting a business, what tax considerations might cause you to prefer