The Appropriate Statement of Cash Flow Activity Category for the Purchase

question 42

Multiple Choice

The appropriate statement of cash flow activity category for the purchase of equipment for cash is

• A)Operating
• B)Financing
• C)Investing
• D)Schedule of noncash investing or financing activity
• E)Not reported on the statement of cash flows

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed; the tax liability as a percentage of annual income.

Terminal Value Assumptions

The assumptions made about the value of a business or project beyond the forecast period when estimating its future cash flows for valuation purposes.

Capital Budgeting

The process through which a company evaluates and selects long-term investments that are consistent with its goal of maximizing shareholder value.

Aggressive Assumption

An optimistic and sometimes risky assumption used in financial forecasting or project planning, often involving higher revenues or lower costs than may actually be realistic.