Under the Indirect Approach, to Preparing the Cash from Operations

question 44

Multiple Choice

Under the indirect approach, to preparing the cash from operations section of the cash flow statement, amortization is added to net income because:

• A)it is not a cash expense.
• B)it is a cash outflow.
• C)it is a source of cash.
• D)it is not an allowable expense in determining net income.

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Definitions:

Return On Investment

A financial ratio used to evaluate the effectiveness of an investment, comparing the gain from the investment to its cost.

Minimum Required Rate

The lowest acceptable rate of return on an investment, used in capital budgeting and decision-making.

Cosmetics Division

A business unit within a company focused on the development, production, and marketing of beauty and skincare products.

Operating Assets

Assets used by a business in its daily operations to generate revenue, such as cash, inventory, equipment, and real estate, excluding investments and non-operational assets.