In Order to Determine Cash Flows from Operations, the Owner

question 112

Multiple Choice

In order to determine cash flows from operations, the owner must add back the depreciation expense to the net profits and then

• A) subtract any decrease in accounts payable.
• B) add any increase in accounts receivable.
• C) add any increase in inventory.
• D) subtract any decrease in inventory.

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Definitions:

Moral Hazard

The situation that can exist when an individual knows more about his or her own actions than other people do. This leads to a distortion of incentives to take care or to expend effort when someone else bears the costs of the lack of care or effort.

Risk Aversion

The tendency to prefer certainty over uncertainty, avoiding risk in decision-making or preferring safer investments.

Insurance

A means of protection from financial loss, characterized by the transfer of risk from one entity to another in exchange for payment.

Consumer

An individual or group who purchases goods and services for personal use.