When Using the Direct Method to Determine Operating Cash Flows

question 94

Multiple Choice

When using the direct method to determine operating cash flows, how is the purchase of equipment for cash shown on the Statement of Cash Flows?

• A)operating activity
• B)investing activity
• C)financing activity
• D)noncash investing and financing activity
• E)not reported on the statement of cash flows

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Definitions:

Compensating

Providing something, typically money, to make up for a loss, damage, or inconvenience caused.

Acquiring

The process of obtaining ownership or control of something, often referenced in the context of corporate takeovers or purchasing assets.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount for immediate cash.

Debt Capital

Funds borrowed by businesses to finance their operations or growth, which must be repaid to lenders with interest.