Holmes Aircraft Recently Announced an Increase in Its Net Income

question 53

Multiple Choice

Holmes Aircraft recently announced an increase in its net income, yet its net cash flow declined relative to last year. Which of the following could explain this performance?

• A) The company's interest expense increased.
• B) The company's depreciation expense declined.
• C) The company's operating income declined.
• D) All of the statements above are correct.
• E) None of the statements above is correct.

---

Definitions:

Management Decisions

These are choices made by the executives of a company affecting its direction and operation.

Planning Horizon

The future time period over which plans are made and resources are allocated.

High-Low Method

A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.

Fixed Component

A portion of the total costs that remains unchanged regardless of the level of activity or production volume.