Which of the Following Statements Is CORRECT

question 35

Multiple Choice

Which of the following statements is CORRECT?

• A) The current cash flow from existing assets is highly relevant to investors. However, since the value of the firm depends primarily upon its growth opportunities, accounting net income projections from those opportunities are the only relevant future flows with which investors are concerned.
• B) Two metrics that are used to measure a company's financial performance are net income and free cash flow. Accountants tend to emphasize net income as calculated in accordance with generally accepted accounting principles. Finance people generally put at least as much weight on free cash flows as they do on net income.
• C) To estimate the net cash provided by operations, depreciation must be subtracted from net income because it is a non-cash charge that has been added to revenue.
• D) Interest paid by a corporation is a tax deduction for the paying corporation, but dividends paid are not deductible. This treatment, other things held constant, tends to discourage the use of debt financing by corporations.
• E) If Congress changed depreciation allowances so that companies had to report higher depreciation levels for tax purposes in 2012, this would lower their free cash flows for 2012.
• Multiple Choice: Problems
• A good bit of relatively simple arithmetic is involved in some of these problems, and although the calculations are simple, it will take students some time to set up the problem and do the arithmetic. We allow for this when assigning problems for a timed test.
• Also, students must use a number of definitions to answer some of the questions. To avoid excessive memorization, we provide students with a list of formulas and definitions for use on exams. Problems with * in the topic line are nonalgorithmic.

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Definitions:

Antiseptic

A substance that prevents the growth of disease-causing microorganisms, commonly used in cleaning wounds and preventing infection.

Dry Heat

A method of sterilization or cooking that involves the use of hot air without moisture.

Sterilization

A process designed to kill or remove all forms of life and other biological agents from a specific surface, area, or item to prevent infection or contamination.

Specula

Instruments used to dilate or open body orifices or cavities for examination, commonly used in gynecological exams.