The Indirect Method of Preparing a Statement of Cash Flows

question 29

Multiple Choice

The indirect method of preparing a statement of cash flows

• A)is the overwhelming choice of most companies.
• B)begins with net income in the operating activities section.
• C)will produce the same net figure as the direct method.
• D)All of these choices.

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Definitions:

Debt Refunding

The process of replacing old debt with new debt, often to take advantage of more favorable borrowing terms or interest rates.

NPV

Net Present Value; a financial metric used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period of time.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR).

After-Tax Annual Interest Savings

The amount of money saved annually on interest payments after accounting for the effects of taxes, often referenced in discussions of debt refinancing or consolidation.