A Security Analyst Obtained the Following Information from Prestopino Products

question 77

Multiple Choice

A security analyst obtained the following information from Prestopino Products' financial statements:
•Retained earnings at the end of 2011 were $700, 000, but retained earnings at the end of 2012 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 2012 was $150, 000.
On the basis of this information, which of the following statements is CORRECT?

• A) Prestopino had negative net income in 2012.
• B) Prestopino's depreciation expense in 2012 was less than $150, 000.
• C) Prestopino had positive net income in 2012, but its income was less than its 2011 income.
• D) Prestopino's NCF in 2012 must be higher than its NCF in 2011.
• E) Prestopino's cash on the balance sheet at the end of 2012 must be lower than the cash it had on the balance sheet at the end of 2011.

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Definitions:

Unique Goods

Items that are distinct in their characteristics, often irreplaceable, and cannot be substituted easily due to their rarity or specific traits.

Breach of Warranty

Occurs when a seller fails to uphold a claim or promise about a product or service.

Discovered the Defect

Discovering the defect involves identifying a flaw or fault in a product or property, usually after a transaction has taken place, impacting the value or safety of the item.

Time of Contract

The specific moment when a contract is considered to have been formed or agreed upon by all parties involved.