Cash Generated from Operating Activities May Be Computed and Reported

question 89

Multiple Choice

Cash generated from operating activities may be computed and reported using

• A) the direct method only.
• B) the indirect method only.
• C) either the direct and indirect methods.
• D) the combination method.

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Definitions:

NPV

Short for Net Present Value, which is a financial metric used to evaluate the profitability of an investment or project, considering the time value of money.

IRR

Internal Rate of Return - a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations and asset disposal decisions.

Sunk Cost

Expenses that have already been incurred and cannot be recovered, and should not influence future business decisions.