The Approach to Preparing a Statement of Cash Flows That

question 23

Multiple Choice

The approach to preparing a statement of cash flows that adjusts net income to cash flows from operations is the

• A) All financial resources method
• B) Direct method
• C) Indirect method
• D) Worksheet method

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Definitions:

Unsystematic Risk

The risk of price change due to the unique circumstances of a specific security, as opposed to the market as a whole.

Market Risk Premium

The extra return expected by investors for taking on the risk of investing in the stock market over a risk-free rate.

Security Market Line

A line representing the relationship between the expected return of a market security and its risk, as measured by beta.

Systematic Risk

The collective risk for all investments in a market or a specific part of the market that cannot be offset through diversification.