Question

Time left 1:42: Greshak Corp. recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance? Select one: A. Greshak's operating income declined. B. The amount Greshak spent on fixed assets declined. C. Greshak's cost of goods sold increased. D. Greshak's depreciation and amortization expenses declined. E. Greshak's interest expense increased. Which of the following statements is most correct? Select one: A. One way to increase EVA is to achieve the same level of operating income but with more investor-supplied capital. B. If a firm reports positive net income, its EVA must also be positive. C. One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free. D. One way to increase EVA is to generate the same level of operating income but with less investor-supplied capital. E. Actions that increase reported net income will always increase net cash flow.

Answer 1

1. depreciation and amortization is not a part of cash flows from operations so decrease of depreciation and amortisation would lead to decrease in the overall net income not decrease in the cash flow from operation.

Correct answer is option ( d)

2. One drawback of EVA is that it assumes equity capital is free but it is actually not free and there is a cost of equity associated with equity capital

Correct option is option (C)