1Cash flow from assets A can be positive negative or equal t

1-Cash flow from assets:

A. can be positive, negative, or equal to zero.

B. equals operating cash flow minus the cash flow to creditors.

C. equals operating cash flow minus net capital spending.

D. equals net income plus non-cash items

2- Market based ratios can be which of the following: I. Price-to-earnings ratio II. Dividend yield A. Neither statement I nor statement II is correct. B. Statement I only is correct. C. Both statements I and II are correct D. Statement II only is correct.

Solution

1) A. can be positive, negative, or equal to zero.

Cash flow from asset can be positive or negative or can even be 0, When asset has salvage value than at end of it\'s useful life one can sell the asset at profit or loss resulting in positive cash flow, However is cost of removing asset exceeds its selling price than there will be negative cash flow.

2) C. Both statements I and II are correct

Both Ratios are market based. In calculation of PE we use market price per share( PE ratio = market price per share/Earning per share) and in dividend yield ratio we use market price ( Dividend yield = Dividend/market price)