Santa Fe Company Was Started on January 1, Year 1

question 3

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,

• A) The balance sheet at December 31, Year 1 would show total 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:

ROE

Return on Equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively a company uses investments to generate earnings growth.

P/E Ratio

Price to Earnings Ratio, a valuation metric comparing a company's market share price to its per-share earnings.

Stock Price

The cost of purchasing a share of a company's stock, representing the market's value of a share of the company's equity.

Days Sales Outstanding

A measure of how long it takes a company to collect payment after a sale has been made, indicating the efficiency of the company's credit and collection policies.