I.

True/false (in your answer, first type True or False, and then explain, 1-2 lines each question)

(In order to obtain a deeper understanding of a firms profit margin and turnover ratio of invested capital, it is useful to decompose the financial ratios by performing an index analysis only.

Return on equity informs about the overall profitability of operations

The turnover ratio of invested capital informs about the overall profitability of operations

a) What were the accrual-based earnings for Period 2?

b) What was the cash flow generated in Period 2?

c) Calculate a traditional cash flow statement based on the seven transactions.

2.Suppose now x=1600

Does your answer above change for a), b), and c). If not, why? If yes, show how it changes.