Which of the Following Statements Is CORRECT

question 70

Multiple Choice

Which of the following statements is CORRECT?

• A) One way to increase EVA is to achieve the same level of operating income but with more investor-supplied capital.
• B) If a firm reports positive net income, its EVA must also be positive.
• C) One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free.
• D) One way to increase EVA is to generate the same level of operating income but with less investor-supplied capital.
• E) Actions that increase reported net income will always increase net cash flow.

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Definitions:

Net Cash Flow

The difference between a company's cash inflows and outflows within a specific period.

Bond Retirement

The process of paying off bond issuance at maturity or through an early buyback, removing the bonds from circulation.

Par Value

Par Value is the nominal or face value of a stock or bond, as stated by the issuer, and has little relation to its market value.

Income Statement

The income statement is a financial report that summarizes the revenues, costs, and expenses incurred during a specific period of time, typically a fiscal quarter or year.