A Security Analyst Obtained the Following Information from Prestopino Products

question 39

Multiple Choice

A security analyst obtained the following information from Prestopino Products' financial statements:
∙Retained earnings at the end of 2014 were $700,000,but retained earnings at the end of 2015 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 2015 was $150,000.
On the basis of this information,which of the following statements is CORRECT?

• A) Prestopino had negative net income in 2015.
• B) Prestopino's depreciation expense in 2015 was less than $150,000.
• C) Prestopino had positive net income in 2015,but its income was less than its 2014 income.
• D) Prestopino's NCF in 2015 must be higher than its NCF in 2014.
• E) Prestopino's cash on the balance sheet at the end of 2015 must be lower than the cash it had on the balance sheet at the end of 2014.

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Definitions:

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, facilitating international trade and investment.

Peg

Fixing the exchange rate of a currency by linking it to another currency or basket of currencies.

Fixed Exchange Rates

A currency system where the value of a country's currency is pegged to another currency, a basket of currencies, or a commodity like gold, minimizing fluctuations in exchange rates.

International Monetary Reserves

International monetary reserves are assets held by central banks or monetary authorities in various forms, such as foreign currencies, gold, and Special Drawing Rights (SDRs), used to back the currency and support economic policies.