Which Statement Concerning a Funds Statement Based on the Working

question 11

Multiple Choice

Which statement concerning a funds statement based on the working capital definition of funds is not correct?

• A) It includes transactions that have no effect on the components of working capital, e.g., the purchase of inventory
• B) It omits many transactions that could be important to users for decision making
• C) The difference between sources and uses of working capital will be equal to the change in working capital between two successive balance sheets
• D) None of the above, i.e., all of the statements are correct

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Definitions:

Price Level

Refers to the average of current prices across the entire spectrum of goods and services produced in the economy.

Real Value

Reflects the purchasing power of an amount of money, considering inflation, and contrasts with nominal value, which does not take inflation into account.

Money Holdings

The quantity of money an individual or entity holds as a store of value and medium of exchange.

Classical Dichotomy

The theoretical separation of nominal variables (such as money supply and prices) from real variables (like output and employment) in the economy, suggesting that nominal variables do not affect real output in the long run.