Which of the Following Describes the "Top-Down" Approach to Defining

question 110

Multiple Choice

Which of the following describes the "top-down" approach to defining operating cash flow?

• A) EBIT + D - Taxes
• B) S - C - Taxes + D
• C) (S - C) (1 - T_C) + DT_c
• D) S - C - Taxes
• E) NI + D

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Definitions:

Owner's Equity

The residual interest in the assets of a business after deducting liabilities; represents the owner's claim on the business assets.

Liabilities

Financial obligations a company owes to outside parties.

Assets

Resources owned or controlled by a business, which are expected to produce future economic benefits.

Accounting Equation

The fundamental principle of accounting that states Assets = Liabilities + Equity, which must always be in balance for accurate financial reporting.