As a Provider of Funds to a Corporation, Owning Which

question 13

Multiple Choice

As a provider of funds to a corporation, owning which of the following corporate securities will give you the strongest rights to cash flow?

• A)Short-term bank loan
• B)Preferred stock
• C)Common stock
• D)Long-term bond

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Definitions:

Direct Method

A method in financial accounting that formats cash flow statements by listing major operating cash receipts and payments, used to provide a clearer view of cash from operating activities.

Fully Depreciated Equipment

An asset that has reached the end of its useful life for accounting purposes, having its cost fully allocated to depreciation expense.

Statement of Cash Flows

A finance report summarizing every cash inflow from ongoing business operations and external investments, and all cash outflows for corporate activities and investment purposes, within a set period.

Operating Activities

The primary day-to-day activities of a business involved in producing and selling its goods or services, reflected in the cash flow statement.