When Analyzing the Statement of Cash Flows, Which of the Following

question 78

Multiple Choice

When analyzing the statement of cash flows, which of the following statements is TRUE?

• A)A company with a large cash balance is ensured success.
• B)A shortage of cash can lead a company to bankruptcy.
• C)Cash has no affect on the success of the company.
• D)Cash is ignored when analyzing a company.

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Definitions:

Controllable Variance

The difference between expected and actual costs that managers have the power to influence directly.

Direct Labor Rate Variance

This refers to the difference between the actual cost of labor and the expected (or standard) cost of labor used in producing goods.

Direct Labor

The cost of wages for workers who are directly involved in the production of goods or the delivery of services.

Variable Overhead Efficiency Variance

The difference between the standard cost of variable overheads allocated for actual production and the actual variable overheads incurred, used to assess efficiency in controlling variable overhead costs.