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

question 26

Multiple Choice

Interest expense appears in the operations section of the cash-flow 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)none of these; interest expense appears in the financing section of the cash-flow statement

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Definitions:

Premium

An amount paid in excess of the normal or nominal value, often relating to the additional cost over the face value of securities or insurance charges beyond standard rates.

Bonds Payable

Long-term liabilities representing borrowed funds that a company is obliged to pay back with interest at specified times.

Valuation Account

An account used to adjust the carrying value of an asset or liability, such as an allowance for doubtful accounts or accumulated depreciation.