Santa Fe Company Was Started on January 1, Year 1

question 68

Multiple Choice

Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Based on this information, which of the following statements is true?

• A) The balance sheet at December 31, Year 1 would show total stockholders' equity of $8,750.
• B) The Year 1 income statement would show net income of $500.
• C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.
• D) The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,750.

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Definitions:

Profitability

An indicator of how well a company is able to produce profit through its business activities.

Liquidity

A measure of how easily assets can be converted into cash or cash equivalents without significantly altering their value, essential for meeting short-term obligations.

Asset Management

A methodical approach to the creation, operation, upkeep, and disposition of assets that ensures cost efficiency.

Debt Financing

Raising capital through borrowing money that must be repaid over time, with interest, from lenders or financial institutions.