Interest Expense Appears in the Operations Section of the Cash-Flows

question 48

Multiple Choice

Interest expense appears in the operations section of the cash-flows statement because:

• A)Firms cannot operate without incurring interest expense
• B)Its payment is not within managerial discretion
• C)It is paid to finance a firm's inventory
• D)False statement; interest expense appears in the financing section of the cash-flows statement

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Definitions:

Rule

A prescribed guideline or regulation for conduct, action, or the operation of systems.

Internal Rate of Return

A metric used in financial analysis to estimate the profitability of potential investments.

Cash Flows

The grand total of financial transactions affecting a company's inflow and outflow, significantly impacting its liquid capital.

Investment

The action or process of investing money for profit or material result.