A Security Analyst Obtained the Following Information from Prestopino Products

question 10

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.

---

Definitions:

Machine-Hours

A unit of measure representing the operation of machinery for one hour, often used in manufacturing and production cost analysis.

Contribution Margin

The sum left from the revenue of sales once variable costs have been subtracted, utilized to pay for fixed expenses and create profit.

Administrative Expenses

Costs related to the general administration of a business, such as salaries of executive personnel, accounting, and human resources.

Net Operating Income

A measure of a company's profitability calculated as total revenue minus operating expenses, excluding interest and taxes.