Why Is the Operating Activities Section Often Believed to Be

question 18

Multiple Choice

Why is the operating activities section often believed to be the most important part of a statement of cash flows?

• A)it gives the most information about how operations have been financed.
• B)it shows the dividends that have been paid to shareholders.
• C)it indicates a company's ability to generate cash from sales to meet current cash needs.
• D)it shows the net increase or decrease in cash during the period.

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Definitions:

Forward Contract

a financial agreement between two parties to buy or sell an asset at a future date for a price agreed upon today, commonly used for hedging and speculation.

Gross Method

The gross method is an accounting practice whereby discounts are not considered in the recording of purchases; discounts taken are recorded as income.

Forward Contract

A specialized agreement crafted between two parties to transact an asset at a certain price on a future agreed date.

ASPE

Accounting Standards for Private Enterprises, a set of accounting principles and standards in Canada designed for private companies.