FIN 534 RANK Change The World /fin534rank.com FIN 534 RANK Change The World /fin534rank.com | Page 33

Which of the following statements is CORRECT?
a. Typically, a firm’s DPS should exceed its EPS.
b. Typically, a firm’s EBIT should exceed its EBITDA.
c. If a firm is more profitable than average (e.g., Google), we would
normally expect to see its stock price exceed its book value per share.
d. If a firm is more profitable than most other firms, we would normally
expect to see its book value per share exceed its stock price, especially
after several years of high inflation.
e. The more depreciation a firm has in a given year, the higher its EPS,
other things held constant.
2. Which of the following statements is CORRECT?
a. The statement of cash flows reflects cash flows from operations, but
it does not reflect the effects of buying or selling fixed assets.
b. The statement of cash flows shows where the firm’s cash is located;
indeed, it provides a listing of all banks and brokerage houses where
cash is on deposit.
c. The statement of cash flows reflects cash flows from continuing
operations, but it does not reflect the effects of changes in working
capital.
d. The statement of cash flows reflects cash flows from operations and
from borrowings, but it does not reflect cash obtained by selling new
common stock.