One of the Purposes of the Statement of Cash Flows

question 132

Multiple Choice

One of the purposes of the statement of cash flows is to ________.

• A) determine the operating income of a business
• B) calculate inventory turnover
• C) evaluate the level of debt and leverage of a company
• D) predict the ability of a company to pay debts and dividends

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Definitions:

Economic Climate

The overall state of the economic environment, factoring in aspects like growth rates, employment levels, inflation, and consumer spending.

Financial Leverage

Financial leverage refers to the use of debt (borrowed funds) to amplify the potential returns to shareholders. It increases the potential for both gains and losses.

Operating Risk

The risk arising from the day-to-day operations of a company, indicating the variability in operating income due to changes in revenue and expenses.

Financial Risk

The potential for losses due to factors affecting the overall financial market or specific securities within a portfolio.