The Three Categories of a Firm's Statement of Cash Flows

question 34

Multiple Choice

The three categories of a firm's statement of cash flows are ________.

• A) cash flow from operating activities, cash flow from investment activities, and cash flow from noncash activities
• B) cash flow from operating activities, cash flow from noncash activities, and cash flow from financing activities
• C) cash flow from equity activities, cash flow from investment activities, and cash flow from financing activities
• D) cash flow from operating activities, cash flow from investment activities, and cash flow from financing activities

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Definitions:

Retained Earnings

Profits that a company has chosen to reinvest in the business rather than distribute to shareholders as dividends, accumulated over time.

Hurdle Rate

The project cost of capital, or discount rate. It is both the rate used in discounting future cash flows in the net present value method and the rate that is compared to the internal rate of return.

Intrinsic Value

The actual value of a company, asset, or currency determined through fundamental analysis without reference to its market value.

Risk-Adjusted

Pertaining to the modification of financial analysis or return on an investment to account for the risk involved, ensuring a more accurate assessment of performance or value.