Which of the Following Statements Is True of the Direct

question 1

Multiple Choice

Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?

• A) The indirect method and the direct method will produce the same amount of net cash provided by operating activities.
• B) The investing activities section is the only section that differs between the direct and indirect methods.
• C) The indirect method shows three types of cash flows, but the direct method does not.
• D) There is no difference in the way the operating activities section is presented.

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Definitions:

Nearly Identical Duration

A characteristic of two or more financial instruments whose cash flows match or are very close in terms of their time structure, minimizing interest rate risk.

Bullish Position

An investment strategy where an investor believes that a particular asset's price will rise.

Performance Evaluation

The process of examining how well investments or portfolios have done over a period, comparing their returns against benchmarks or objectives.

Survivorship Bias

The analytical error of focusing only on entities that have "survived" a selection process, ignoring those that have failed.