Which of the Following Determines Whether a Firm Will Earn

question 72

Multiple Choice

Which of the following determines whether a firm will earn higher revenues when it raises its price?

• A)The cost of the firm's inputs.
• B)Government regulation of the industry.
• C)The price elasticity of demand.
• D)None of these, because companies always earn higher revenues when they increase price.

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Definitions:

Indirect Method

A way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is retained by the company to reinvest in its core business or to pay debt.

Reported Net Income

The total profit or loss of a company after all expenses and taxes have been subtracted from total revenue, as shown on the income statement.

Direct Method

An approach to preparing the cash flow statement where actual cash inflows and outflows from operational activities are listed.