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 amortizationcharges.- 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?

Question

Quizplus · Accepted Answer

CThe decline in retained earnings from $700,000 to $320,000 without dividend payments indicates a negative net income, supporting choice A. However, the positive net cash flow (NCF) of $150,000 suggests that the company had positive net income when non-cash expenses like depreciation are considered, supporting choice C.

A Security Analyst Obtained the Following Information from Prestopino Products