If a Company Uses the Indirect Method to Prepare the Statement

question 114

Multiple Choice

If a company uses the indirect method to prepare the statement of cash flows, how will a loss from the sale of equipment be presented on the statement?

• A)A loss from the sale of equipment will be added to net income in the operating activities section.
• B)A loss from the sale of equipment will be an addition in the financing activities section.
• C)A loss from the sale of equipment will be deducted from net income in the operating activities section.
• D)A loss from the sale of equipment will be an addition in the investing activities section.

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Definitions:

Expected Return

The anticipated profit or loss from an investment, taking into account the possibility of various outcomes.

Standard Deviation

A parameter that assesses the extent of difference or range within a batch of numerical values.

Risk-Averse Investor

An investor who prefers lower returns with known risks rather than higher returns with unknown risks.

Slope of the Budget Line

The rate at which one good can be traded for another, reflecting the relative prices of two goods.