A Swap Is an Arrangement for Two Counterparties To

question 5

Multiple Choice

A swap is an arrangement for two counterparties to:

• A) exchange cash flows over time.
• B) permit fluctuation in interest rates.
• C) help exchange markets clear.
• D) All of these.
• E) None of these.

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Definitions:

Indirect Method

A way of calculating cash flow from operating activities by starting with net income and adjusting for changes in non-cash balance sheet items.

Financing Activities

Transactions that involve raising funds for the company, including issuing debt, issuing equity, and paying dividends.

Operating Activities

Business activities related to the day-to-day functions of a company, involving revenues and expenses.

Indirect Method

An approach used in cash flow statement preparation that adjusts net income for changes in balance sheet accounts to derive operating cash flows.