The Statement of Cash Flows Should Help Investors and Creditors

question 121

Multiple Choice

The statement of cash flows should help investors and creditors assess each of the following except the

• A) entity's ability to generate future income.
• B) entity's ability to pay dividends.
• C) reasons for the difference between net income and net cash provided by operating activities.
• D) cash investing and financing transactions during the period.

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Definitions:

CVP Analysis

Cost-Volume-Profit Analysis; a financial tool used to determine the impact on an organization's profits due to changes in volume, costs, and prices.

Fixed Cost Per Unit

The portion of fixed costs attributed to each unit of production, which stays constant regardless of the level of production or sales volume.

CVP Analysis

Cost-Volume-Profit Analysis; a management accounting tool that helps understand the relationship between costs, volume, and profit.

Inventory

Inventory consists of goods and materials held by a business for the purpose of resale or as part of the production process.