A Company Reported Net Income of $200,000 During 2010

question 72

Multiple Choice

A Company reported net income of $200,000 during 2010.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Based on the information provided,how much is the company's cash flow from operating activities?

• A)$245,000
• B)$250,000
• C)$240,000
• D)$235,000

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Definitions:

MM Model

Modigliani-Miller Model; a theory on capital structure that suggests the market value of a firm is determined by its earning power and the risk of its underlying assets.

Tax-Deductibility

Pertains to expenses that can be subtracted from gross income to reduce the total taxable income, thereby lowering the amount of tax owed.

Financial Leverage

Engaging borrowed assets to increase the anticipated yield from an investment.

Operating Leverage

The degree to which a company uses fixed operating costs, where a higher degree indicates that a small change in sales will have a larger impact on operating income.