Which of the Following Operating Activities Results in a Cash

question 34

Multiple Choice

Which of the following operating activities results in a cash outflow?

• A)Paying creditors for merchandise
• B)Collecting accounts receivable
• C)Making cash sales
• D)Receiving deposits recorded as unearned revenue

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Definitions:

Plowback

The reinvestment of earnings by a company back into its business, often for expansion or development; also known as retained earnings.

PEG Ratio

A stock's price-to-earnings ratio divided by the growth rate of its earnings, used to determine the relative trade-off between the price of a stock, the earnings generated per share, and the company's expected growth.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholder equity, indicating how effectively management is using a company’s assets to create profits.

Earnings Retention Ratio

The earnings retention ratio, also known as the plowback ratio, measures the percentage of net income that is retained in the company rather than being paid out as dividends.