This question has been answered by Expert on Mar 25, 2011. View Solution
posted a question
A security analyst obtained the following information from Prestopino Products’ financial statements:

• Retained earnings at the end of 2009 were $700,000, but retained earnings at the end of 2010 had declined to $320,000.
• The company does not pay dividends.
• The company’s depreciation expense is its only non-cash expense; it has no amortization charges.
• The company has no non-cash revenues.
• The company’s net cash flow (NCF) for 2010 was $150,000.

On the basis of this information, which of the following statements is CORRECT? (Points: 10)
Prestopino had negative net income in 2010.
Prestopino’s depreciation expense in 2010 was less than $150,000.
Prestopino had positive net income in 2010, but its income was less than its 2009 income.
Prestopino's NCF in 2010 must be higher than its NCF in 2009.
Prestopino’s cash on the balance sheet at the end of 2010 must be lower than the cash it had on the balance sheet at the end of 2009.
Expert answered the question
Dear Student,
Please find the solution attached herewith....  View Full Answer

Download Preview:

A security analyst obtained the following information from Prestopino Products
financial statements:
Retained earnings at the end of 2009 were $700,000, but retained earnings at the end of
2010...