The Two Approaches of Reporting Cash Flows Provided by Operating

question 138

Multiple Choice

The two approaches of reporting cash flows provided by operating activities are the

• A)direct and indirect methods.
• B)basic and standard methods.
• C)gross margin and contribution margin methods.
• D)liquidity and profitability methods.

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Definitions:

Margin Of Safety Ratio

A financial metric that indicates how much sales can decline before a business reaches its break-even point.

Costs And Expenses Ratio

A financial metric that compares the costs and expenses of a company to its total revenue, indicating the efficiency of its operations.

Variable Costs

Costs that change in proportion to the good or service that a business produces, such as raw materials and direct labor.

Fixed Costs

Costs that do not vary with the level of production or sales volume, such as rent, salaries, and insurance premiums.