You are operating a heavy equipment leasing and rental company. Your consultant tells you to focus you marketing strategy on new startup companies rather than thriving companies that are remodeling and seeking new equipment. Why might this suggestion be a good one given our tax code?
What will be an ideal response?
The tax code allows firms to write off depreciation as a cost against profits. This helps those companies making profit since it lowers their tax bill. However, if a company is starting up it is probably not going to make profits for a year or two. During that time its depreciation charges are worthless since they pay no taxes anyway. Since the rental company takes the depreciation charge on the equipment it owns and leases, it can offer the start-up companies a lease price on the equipment that is lower than the expense the company would have to absorb if it bought the equipment and had no profit against which apply the depreciation charges.
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Compared to a proprietorship, a disadvantage of a partnership is
A) that profits are taxed twice. B) that it is harder to keep the firm going after the death of an owner. C) unlimited liability. D) that potential liability to each partner is greater.
The fact that since 1990 the number of movie screens in the United States has grown faster than the number of theaters illustrates the benefits of
a. economies of scale b. constant long-run average cost c. diseconomies of scale d. increasing long-run average cost e. a U-shaped marginal cost curve
Which of the following statements is true?
A) A buyer who sets a price so that he can purchase any amount of a good he wants at a fixed price, if he has the money to pay for it, is called a price leader. B) All buyers in a perfectly competitive market set prices to compete in their market. C) The relative prices of goods do not affect a consumer's buying decision. D) A consumer in a perfectly competitive market buys only a tiny fraction of the total amount produced.
Japan and Germany are two major __________-oriented systems
A) securities B) equities C) banking D) markets