The Indirect and Direct Methods of Preparing the Statement of Cash

question 134

Multiple Choice

The indirect and direct methods of preparing the statement of cash flows are identical except for the

• A) financing activities section.
• B) investing activities section.
• C) operating activities section.
• D) significant noncash activities section.

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Definitions:

Subsidiary

A company controlled by another company, often referred to as its parent company.

Interest Rate Parity

A theory in financial economics that suggests the difference between the interest rates of two countries is equal to the difference between the forward exchange rate and the spot exchange rate.

Forward Rate

The agreed-upon price for a financial transaction that will occur at a future date, used primarily in foreign exchange and interest rate markets.

Spot Rate

The present market rate at which a specific asset, like a currency, commodity, or security, is available for purchase or sale with immediate delivery.