Baltimore Company Had a Long-Term Debt of $1,000,000

question 47

Multiple Choice

Baltimore Company had a long-term debt of $1,000,000. To extinguish this debt the company issued $1,000,000 of fully paid shares to the lender. This transaction would have the following impact on the cash flow statement:

• A) no impact.
• B) increase cash by $1,000,000.
• C) increase cash flow from financing activities by $1,000,000.
• D) decrease cash by $1,000,000.

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Definitions:

Predictive Validity

The extent to which a score or measurement can accurately predict future performance or behavior.

Concurrent Validity

A measure of how well a particular test correlates with a previously validated measure.

Content Validity

The extent to which a test measures all aspects of the construct it is supposed to measure.

Construct Validity

A measure of how well a test or tool assesses the construct it claims to measure, indicating the appropriateness of inferences made from test scores.