Cash Flow from Investing Activities Is Considered the Most Important

question 13

True/False

Cash flow from investing activities is considered the most important category on the cash flow statement because it is considered the best measure of expected earnings.

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Definitions:

Assets

Resources owned or controlled by a business, expected to produce economic value or benefits in the future.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or decline in value.

Amortization Expense

The process of allocating the cost of an intangible asset over its useful life for accounting and tax purposes.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends, accumulated over the company’s life.