Which One of the Following Is a Principal Function of the Statement

question 139

Multiple Choice

Which one of the following is a principal function of the statement of cash flows?

• A) To predict future profit growth
• B) To calculate the turnover of inventory
• C) To evaluate the level of debt and leverage of a company
• D) To predict the ability to pay debts and dividends

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold before accounting for other expenses.

Perpetual Inventory System

An accounting method that records inventory purchases or sales in real-time through the use of computerized point-of-sale systems and enterprise asset management software.

Cost of Merchandise Sold

The total cost incurred by a company to sell goods during a specific period, including purchase and direct labor costs.

Merchandising Business

A type of business that purchases goods wholesale and resells them retail; primarily involved in selling merchandise to consumers.