Which of the Following Transactions Would Be Considered a Financing

question 76

Multiple Choice

Which of the following transactions would be considered a financing activity in preparing a statement of cash flows?

• A) Amortizing a discount on bonds payable
• B) Recording net income from operations
• C) Selling common stock
• D) Purchasing inventory

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Definitions:

Variable Costs

Costs that vary in direct proportion to the level of production or sales volume, like raw materials and direct labor.

Fixed Costs

Costs that do not vary with the level of production or sales over a specified period, such as rent or salaries.

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross profits.

Contribution Margin

The residual amount from sales income post the subtraction of variable costs, signifying its role in offsetting fixed expenses and creating profit.