The Statement of Cash Flows Reports Cash Flows from the Activities

question 95

Multiple Choice

The statement of cash flows reports cash flows from the activities of:

• A)Operating,purchasing,and investing.
• B)Borrowing,paying,and investing.
• C)Operating,investing,and financing.
• D)Using,investing,and financing.

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Definitions:

Normal Profits

The minimum level of profit required for a company to remain competitive in the market, often considered the opportunity cost of capital.

Economic Losses

Financial losses incurred due to inefficiencies, decreased demand, or negative external factors affecting the economy.

Economic Profits

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, indicating the extra income earned over what could have been earned in the next best alternative.

Accounting Profits

The sales revenues minus the expenses of a firm over a designated time period, usually one year. Accounting profits typically make allowances for changes in the firm’s inventories and depreciation of its assets. No allowance is made, however, for the opportunity cost of the equity capital of the firm’s owners, or other implicit costs.