Which Statement About the Statement of Cash Flows Is FALSE

question 62

Multiple Choice

Which statement about the statement of cash flows is FALSE?

• A)The statement of cash flows is based on information from several financial statements.
• B)The statement of cash flows is based on information from a company's income statement only.
• C)The change in the Cash account on the comparative balance sheets is the check figure for the statement of cash flows.
• D)The indirect method of preparing the statement of cash flows is used by the vast majority of companies in the United States.

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Definitions:

Incremental Free Cash Flows

The additional cash flow a project generates for a company, calculated after accounting for the project's direct costs.

Conglomerate Mergers

Mergers between firms that operate in unrelated business activities, aiming for diversification and risk reduction.

Golden Parachutes

Large financial benefits or compensation packages given to top executives if the company is taken over by another firm, and they are terminated as a result of the merger or takeover.

Leveraged Buyouts (LBOs)

A financial transaction in which a company is acquired using a significant amount of borrowed money to meet the cost of acquisition, often using the assets of the company being acquired as collateral.