Occasionally,a Company Will Encounter Circumstances in Which Cash Flows Are

question 26

Multiple Choice

Occasionally,a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason.We refer to such a situation as:

• A)a liquidity shock.
• B)a negative cash flow shock.
• C)a negative liquidity shock.
• D)a cash crunch.

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Definitions:

Weighted-Average Method

Inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all materials purchased during a period.

Work in Process

Work in process refers to materials and components that are part of a manufacturing process but have not yet been completed as finished goods.

Weighted-Average Cost Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units purchased during the period.

Conversion Costs

The aggregate expenditure on direct labor and manufacturing overhead necessary for converting raw materials into final products.