What Does the Information in the Statement of Cash Flows

question 60

Multiple Choice

What does the information in the statement of cash flows help investors,creditors and others to do?

• A) It assesses a company's ability to produce future net income.
• B) It judges a company's ability to meet its obligations and pay dividends.
• C) It estimates the company's need for assets.
• D) It shows the inflows and outflows of net income on the accrual basis.

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Definitions:

Cost of Equity

The return that shareholders require for investing in a company’s equity.

Return on Assets

A financial ratio that indicates how profitable a company is relative to its total assets by dividing net income by total assets.

Return on Debt

A measure of how much profit a company generates for every dollar of debt, indicating the efficiency of using borrowed funds.

Total Equity

The net value of a company, determined by subtracting total liabilities from total assets.