Which of the following statements is most correct?
A) Actions which increase net income will always increase net cash flow.
B) One way to increase EVA is to maintain the same operating income with less capital.
C) One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free.
D) Answers a and b are correct.
E) Answers a and c are correct.

Question

Quizplus · Accepted Answer

Option A is not always correct because an increase in net income could be due to non-cash expenses such as depreciation. Option C is incorrect because EVA explicitly assumes that equity capital has a cost. Option D is incorrect because only option B is correct. Therefore, the best choice is option B as it correctly identifies a way to increase EVA.

Which of the Following Statements Is Most Correct