When Using the Direct Method to Determine Operating Cash Flows,how

question 26

Multiple Choice

When using the direct method to determine operating cash flows,how is the purchase of equipment for cash shown on the statement of cash flows?

• A) as an operating activity
• B) as an investing activity
• C) as a financing activity
• D) as a noncash investing and financing activity

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Definitions:

Present Value of Net Inflows

The current value of a series of cash inflows expected in the future, discounted back at a particular rate to account for the time value of money.

Annual After-Tax Cash Flow

The amount of money a company has left after paying all its taxes and accounting for all its expenses and income over a year.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.