The First Three Elements of a Financial Crisis Are Correctly $\rarr$

question 118

Multiple Choice

The first three elements of a financial crisis are correctly represented as taking place in the following order:

• A)large decline in some asset prices \(\rarr\) insolvencies at financial institutions \(\rarr\)decline in confidence in financial institutions
• B)insolvencies at financial institutions \(\rarr\)decline in confidence in financial institutions \(\rarr\)large decline in some asset prices
• C)insolvencies at financial institutions \(\rarr\)economic downturn \(\rarr\)credit crunch
• D)insolvencies at financial institutions \(\rarr\)credit crunch \(\rarr\)economic downturn

---

Definitions:

Direct Method

A way to present the cash flow statement where actual cash flows from operating activities are listed directly.

Net Cash Flows

The difference between cash inflows and outflows in a company over a specific period, indicating the net change in cash and cash equivalents.

Operating Activities

These are the day-to-day actions involved in running a business, which include generating revenue, incurring expenses, and producing the fundamental cash flows of the business.

Indirect Method

A way of reporting cash flows from operating activities by starting with net income and adjusting for changes in non-cash accounts.