Which of the Following Statements Is CORRECT

question 60

Multiple Choice

Which of the following statements is CORRECT?

• A) Actions that increase reported net income will always increase cash flow.
• B) One way to increase EVA is to generate the same level of operating income but with less investor-supplied capital.
• C) One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free.
• D) One way to increase EVA is to achieve the same level of operating income but with more investor-supplied capital obtained at a higher cost of capital.
• E) If a firm reports positive net income, its EVA must also be positive.

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Definitions:

Joint Ventures

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project, sharing both the profits and risks.

AASB 128/IAS 28

A standard specifying the accounting treatment for investments in associates and joint ventures, focusing on the application of the equity method.

Managerial Personnel

Employees who are responsible for making key decisions and overseeing the operations of a company, including executives and departmental managers.