A Security Analyst Obtained the Following Information from Prestopino Products

question 29

Multiple Choice

A security analyst obtained the following information from Prestopino Products' financial statements: - Retained earnings at the end of 2008 were $700,000, but retained earnings at the end of 2009 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 2009 was $150,000.
On the basis of this information, which of the following statements is correct?

• A) Prestopino had negative net income in 2009.
• B) Prestopino's depreciation expense in 2009 was less than $150,000.
• C) Prestopino had positive net income in 2009, but its income was less than its 2008 income.
• D) Prestopino's NCF in 2009 must be higher than its NCF in 2008.

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Definitions:

Exchange Process

The exchange process refers to the series of actions in which two or more parties give something of value to each other, usually in the context of business or trade.

Perceived Needs

The subjective understanding or belief of individuals about what they must have or achieve.

Buyer's Market

A market condition characterized by an abundance of goods available, giving buyers an advantage over sellers in price negotiations.

Shortage of Goods

A situation where the demand for a product exceeds the supply available in the market, often leading to higher prices and unmet consumer needs.