During 2014, the Bowtie Company Reported Net Income of $1,872

question 76

Multiple Choice

During 2014, the Bowtie Company reported net income of $1,872 million, depreciation expense of $1,412 million and $978 million paid for purchases of property, plant and equipment. What would be the effect on cash flows from operating activities during 2014?

• A) Cash flows from operating activities would be increased by depreciation expense and decreased by the property, plant and equipment purchases.
• B) Cash flow from operating activities would be increased by depreciation expense and by the property, plant and equipment purchases.
• C)Cash flow from operating activities would be increased by depreciation expense but the property, plant and equipment purchases would have no effect on cash flow from operating activities.
• D)Depreciation is a noncash expense and would not be used to calculate cash flow from operating activities.

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Definitions:

Dividend Payment

A distribution of a portion of a company's earnings to its shareholders, typically in the form of cash or stock.

Common Stock

A type of equity security that represents ownership in a corporation, with voting rights and a share in profits through dividends.

Paid-In Capital

Paid-in capital is the amount of money a company has received from shareholders in exchange for shares of stock.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by its issuer.