In a Statement of Cash Flows, Interest Payments to Lenders

question 15

Multiple Choice

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

• A) operating activities.
• B) borrowing activities.
• C) lending activities.
• D) financing activities.

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Definitions:

Reserve Ratio

The fraction of deposits that a bank must hold in reserve and not lend out, as required by monetary authorities.

Reserve Ratio

The fraction of depositors' balances that banks must have on hand as cash, a requirement determined by the central bank.

Money Multiplier

The mechanism by which the base money supply is expanded through the banking system's ability to lend and create deposits.

Reserve Ratio

The portion of depositors' balances that banks must have on hand as cash.