Question 1
Tibbs Inc. had the following data for the year ended December 31, 2020: Net income = $500; Net operating profit after taxes (NOPAT) = $600; Total assets = $3,400; Short-term investments = $400; Shareholders’ equity = $2,200; Total debt = $1,200; and Total operating capital = $2,800. What was its return on invested capital (ROIC)?
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19.96%
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20.07%
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21.43%
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22.39%
Question 2
To estimate a firm’s cash flow from operations, depreciation is added back to net income. Which of the following is true regarding depreciation?
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Depreciation is an extraordinary expense that is not always deducted when calculating net income, and it should not be added back to net income when calculating a firm’s cash flow from operations.
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Depreciation is an extraordinary expense that is not always deducted when calculating net income, and it must be added back to net income when calculating a firm’s cash flow from operations.
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Depreciation is a noncash expense resulting from the purchase of fixed assets, but it should not be added back to net income when determining a firm’s cash flow from operations.
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Depreciation is a noncash expense resulting from the purchase of fixed assets, and it must be added back to net income when determining a firm’s cash flow from operations.
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