In Developing the Cash Flows from Operating Activities Most Companies

question 158

Multiple Choice

In developing the cash flows from operating activities most companies in the U. S.

• A) use the direct method.
• B) use the indirect method.
• C) present both the indirect and direct methods in their financial reports.
• D) prepare the operating activities section on the accrual basis.

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Definitions:

Risk

The potential for loss, damage, or any other negative occurrence that may be avoided through preemptive action.

Probability Distributions

Mathematical functions that describe all the possible values and likelihoods that a random variable can take within a given range.

Cost of Capital

The cost of funds used for financing a business, calculated as the weighted average of debt and equity costs.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the firm's goal of wealth maximization.