The Following Amounts Represent Totals from the First Three Years

question 144

Multiple Choice

The following amounts represent totals from the first three years of operations.Calculate the balance of Retained Earnings at the end of 2018. $$\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 1 6 } & \mathbf { 2 0 1 7 } & \mathbf { 2 0 1 8 } \\\hline \text { Net Income } & \$ 1,200 & - \$ 500 & \$ 2,300 \\\hline \text { Net Cash Flows } & \$ 500 & \$ 300 & \$ 2,800 \\\hline \text { Diwidends } & \$ 200 & \$ 0 & \$ 200 \\\hline \text { Issuance of Stock } & \$ 2,000 & \$ 0 & \$ 0 \\\hline\end{array}$$

• A)$2,600
• B)$4,600
• C)$3,100

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Definitions:

Profitability Index

A ratio or index that measures the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Investment Project D

A specific project undertaking related to investment, often involving substantial capital expenditure and financial planning.

Profitability Index

A financial metric used to evaluate the profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Incremental Annual Revenues

The additional revenue generated from a specific action or decision, measured on an annual basis.