Which of the Following Statements Regarding Calculation of Cash Flows

question 48

Multiple Choice

Which of the following statements regarding calculation of cash flows from operating activities under the indirect method is true?

• A)When the indirect method is used,changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities.
• B)When the indirect method is used,depreciation expense is added to net income as a step in the process of calculating net cash flow from operating activities.
• C)When the indirect method is used,gains on the sale of property,plant and equipment are added to convert net income to net cash flow from operating activities.
• D)When the indirect method is used,changes in long-term liabilities are subtracted to convert net income to net cash flow from operating activities.

Understand advanced strategies such as rate anticipation swaps, substitution swaps, and the use of convexity in portfolio management.

Understand the concept of bond duration and its calculation.

Calculate the change in bond prices given duration and a change in yield.

Distinguish between Macaulay duration and modified duration.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which bears significance for accounting and financial regulation.

Annual Return

The percentage change in an investment's value over a year, considering both capital gains and dividends.

Indefinitely

An unspecified period of time that may continue forever, without a predetermined endpoint.

Dividend

A portion of a company's earnings distributed to its shareholders, usually periodically.