The document contains 4 multiple choice questions about business and accounting concepts. Question 1 asks about why Firm B has a larger net profit margin than Firm A despite identical operating profit margins. Question 2 asks about a source of cash flow from financing activities. Question 3 asks about the most likely explanation for why Firm A has a much larger gross profit margin than other firms in its industry. Question 4 asks about what retained earnings on the balance sheet represents.

1. Question 1
Firms A and B have identical operating profit margins but B has a larger net profit margin.
Which of the following is the most likely explanation?
Firm B spends more on marketing
Firm B has more long-term debt
Firm B pays a lower tax rate
Firm B has more depreciation expense
none of the above is a likely explanation
8 points
Question 2
Which of the following is a so urce of cash flow from financing activities?
a decrease in accounts receivable
an increase in accounts payable
the sale of a mainframe computer
the sale of new shares of common stock
interest received from US Treasury bonds
8 points
Question 3
Firm A's gross profit margin is much larger than the other firms in the industry. Which of the
following is the most likely explanation?
Firm A has a very old, very inefficient production facility.
Firm A faces a higher tax rate.
Firm A uses too much middle management.
Firm A has a terrible public reputation for selling inferior products

2. Firm A has the only non-unionized workforce in the industry
8 points
Question 4
Retained earnings on the balance sheet represents
net profits after taxes.
cash.
net profits after taxes minus preferred dividends.
the cumulative total of earnings reinvested in the firm.
Firm B spends more on marketing
Firm B has more long-term debt
Firm B pays a lower tax rate
Firm B has more depreciation expense
none of the above is a likely explanation
Solution
1) Firm B pays a lower tax rate
2)
the sale of new shares of common stock
3)
Firm A has a terrible public reputation for selling inferior products

3. 4)
net profits after taxes minus preferred dividends.