To Properly Evaluate the Purchase of a Long-Term Asset, the Expected

question 66

Multiple Choice

To properly evaluate the purchase of a long-term asset, the expected future cash flows must be adjusted for

• A) Property taxes
• B) Interest
• C) Time value of money
• D) Future revenues

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Definitions:

Indirect Method

An approach to report cash flows from operating activities on the cash flow statement, adjusting net income for changes in non-cash accounts.

Operating Activities

Activities that constitute the primary or main operations of a company, including sales, service, and administrative functions, as reflected in the cash flow statement.

Cash Flow Ratio

A financial metric that measures a company's ability to cover its obligations with cash from operating activities, indicating its liquidity position.

Total Assets

The sum of all owned resources with economic value that are expected to provide future benefit to the business.