A Security Analyst Obtained the Following Information from Prestopino Products

question 33

Multiple Choice

A security analyst obtained the following information from Prestopino Products' financial statements: •Retained earnings at the end of 2011 were $700,000,but retained earnings at the end of 2012 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 2012 was $150,000.
On the basis of this information,which of the following statements is CORRECT?

• A) Prestopino had negative net income in 2012.
• B) Prestopino's depreciation expense in 2012 was less than $150,000.
• C) Prestopino had positive net income in 2012, but its income was less than its 2011 income.
• D) Prestopino's NCF in 2012 must be higher than its NCF in 2011.
• E) Prestopino's cash on the balance sheet at the end of 2012 must be lower than the cash it had on the balance sheet at the end of 2011.

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Definitions:

Total Fixed Costs

The cumulative amount of all expenses that do not change in total despite changes in the activity level or volume of production over a certain period.

Activity Is Higher

A state indicating increased levels of operations or actions in a given context.

Variable Overhead Efficiency Variance

The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.

Insufficient Demand

A situation where the quantity of a product or service desired by consumers is less than what is supplied in the market.