Elkins Feed Lot Is an All-Equity Firm with Positive Net

question 30

Multiple Choice

Elkins Feed Lot is an all-equity firm with positive net income.Which one of the following will result if the firm pays a cash dividend?

• A)Number of shares outstanding will increase
• B)Earnings per share will decrease
• C)Total assets will remain constant
• D)Price-earnings ratio will decrease
• E)Total equity will increase

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Definitions:

Equipment Purchase

Equipment purchase refers to the acquisition of physical assets, such as machinery or tools, necessary for a company to operate and produce goods or provide services.

Operating Activities

Transactions and events that relate to the core business functions, such as receipts from sales of goods and services, payments to suppliers, and salaries to employees.

Depreciable Asset

A type of asset that loses value over time due to wear and tear, decay, or obsolescence, which can be accounted for through depreciation.

Indirect Method

A method of preparing the cash flow statement in which net income is adjusted for non-cash transactions and changes in working capital.