Interest Expense Appears in the Operations Section of the Statement

question 77

Multiple Choice

Interest expense appears in the operations section of the statement of cash flows 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 the options; interest expense appears in the financing section of the statement of cash flows.

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Definitions:

Depreciable Asset

An asset that loses value over time due to usage, wear and tear, or obsolescence, which can be an expense on the income statement over its useful life.

Fixed Asset

A long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income.

Intangible

Assets that lack physical substance but hold value for a firm, such as patents, trademarks, and goodwill.

Commercial Substance

An aspect of transactions indicating that it will result in a significant change in the economic circumstances of the participating entities.