2. Cash flow to stockholders must be positive when: a. dividends paid exceed the
ID: 2783363 • Letter: 2
Question
2. Cash flow to stockholders must be positive when: a. dividends paid exceed the net new equity raised. b. the net sale of common stock exceeds the amount of dividends paid. c. no income is distributed but new shares of stock are sold. d. both the cash flow to assets and the cash flow to creditors are negative. e. both the cash flow to assets and the cash flow to creditors are positive. 3. All else constant, the earnings per share will increase if the: a. net income decreases. b. number of shares outstanding increases. c. total revenue of the firm decreases. d. tax rate decreases. e. operating costs increase. 4. Which one of the following will decrease a firm's operating cash flow? a. a decrease in wages paid b. an increase in sales c. a decrease in the depreciation expense d. a decrease in the marginal tax rate e. a decrease in net working capital 5. A firm has net working capital of $820. Long-term debt is $3,260, total assets are $5,920 and fixed assets are $3,410. What is the amount of the total liabilities? a. $2,440 b. $4,080 c. $4,130 d. $4,230 e. $4,950Explanation / Answer
2.
Cash flow to stockholder means cash flow from company to its stockholder. if dividend payment is higher than net equity issued during period then cash flow to stock holder would be positive.
Option (A) is correct answer.
3.
If tax rate decrease then total income of comapny increase and so earnings per share of comapny will be increase.
Option (D) is correct answer.
4.
A decrease in depreciation expenses will decrease in opearting cash flow of comapny.
Option (C) is correct answer.
5.
Current Assets = $5,920 - $3,410
= $2,510.
Current liabilities = $2,510 - $820
= $1,690.
Current Liabilities is $1,690.
Total Liabilities = $3,260 + $1,690
= $4,950.
Total liabilities of comapny is $4,950.
Option (E) is correct answer.
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