A companys bottom line or net income decreased Which of the

A company\'s \'bottom line\' or net income decreased. Which of the following statements is most correct?

Question 12 options:

A) Either sales decreased, expenses increased, or both may have happened.

B)The only possible cause is that sales decreased.

C) Either sales increased, expenses decreased, or both may have happened.

D) The only possible cause is that expenses increased.

Assume a company is evaluating three different investments. Investment A has an NPV of $0.00. Investment B has a positive NPV of $2,000. Investment C has a negative NPV of ($1,000). Which of the following statements is most true?

Question 21 options:

1) Only B is worthy of the company\'s investment money, since the others fail to earn the minimum cost of capital.

2) A and B are worth investing in (though they should be carefully compared to each other and evaluated further),, but C should be avoided by the company, since it does not earn the minimum cost of capital.

3) Only A should be invested in, because it’s IRR = the cost of capital.

4) All three investments are worth investing in by the company (though they should be carefully compared to each other and evaluated further), since all three at least made the minimum cost of capital.

Solution

A company\'s \'bottom line\' or net income decreased. Which of the following statements is most correct?

Ans: A) Either sales decreased, expenses increased, or both may have happened.

Net income = Revenue(Sales) - Expenses

Here revenue means we consider it as from sales...so to decrese net income either sales mmust have decreased or expenses migh have increased or both.

Because if sales increased then net income may increases by keeping expenses constant.

Example let us assume these values..

Net income= 10, Sales = 15 , Expenses = 5

So if net income decreased means let us consider it fall to 5. Which means sales may be decreased to 10 and expenses as same as 5. Or expenses may rised to 10 while sales are same as 15.

Assume a company is evaluating three different investments. Investment A has an NPV of $0.00. Investment B has a positive NPV of $2,000. Investment C has a negative NPV of ($1,000). Which of the following statements is most true?

Answer: ) A and B are worth investing in (though they should be carefully compared to each other and evaluated further),, but C should be avoided by the company, since it does not earn the minimum cost of capital.

A with NPV zero means it is just worth for what you are paying. May be comapny uses goodwill factor to procedd further.

Always consider NPV >= 0 for any profitable investment.