Which of the Following Statements Is CORRECT

question 93

Multiple Choice

Which of the following statements is CORRECT?

• A) An increase in accounts receivable is added to net income in the operating activities section because if accounts receivable increase, then when they are collected cash will come into the firm.
• B) In finance, we are generally more interested in cash flows than in accounting profits. Free cash flow (FCF) is calculated as after-tax operating income plus depreciation less the sum of capital expenditures and net operating working capital. Free cash flow is the amount of cash that could be withdrawn without harming the firm's ability to operate and to produce future cash flows.
• C) The first major section of a typical statement of cash flows is "Operating Activities," and the first entry in this section is "Net Income." Then, also in the first section, we show some items that add to or subtract from cash, and the last entry is called "Net Cash Provided by Operating Activities." This number can be either positive or negative, but if it is negative, the firm is almost certain to soon go bankrupt.
• D) The next-to-last line on the income statement shows the firm's earnings, while the last line shows the dividends the company paid. Therefore, the dividends are frequently called "the bottom line."
• E) Most rapidly growing companies have positive free cash flows because cash flows from existing operations will exceed fixed assets and working capital needed to support the growth.

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Definitions:

Side Rails

Metal or plastic guards that attach to the sides of a hospital bed to prevent patients from rolling out of bed and to assist them in repositioning themselves.

Call Bell

A device used by patients to alert or call for medical staff assistance, commonly found in hospitals and long-term care facilities.

Hearing Aid

A small electronic device worn in or behind the ear that amplifies sound for people with hearing loss.

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Devices consisting of one or more electrochemical cells with external connections, used to power electrical devices.