Which of the Following Statements Is True

question 143

Multiple Choice

Which of the following statements is true?

• A)Investment in another company's common stock is classified as a cash outflow from financing activities on the Statement of Cash Flows.
• B)Repayment of long-term debt is classified as a cash outflow from investing activities on the Statement of Cash Flows.
• C)Losses on the sale of long-term assets are an adjustment reported in the operating activities section of the Statement of Cash Flows under the indirect method.
• D)Dividends paid are classified as a cash outflow from operating activities on the Statement of Cash Flows.

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Definitions:

Expected Rate

The rate of return that an investor anticipates earning on an investment without taking into account inflation or other factors that could affect the actual yield.

Liquidity Spreads

The difference in yield or cost between liquid (easily convertible to cash) assets and illiquid assets, often indicative of the liquidity premium required by investors.

Security A

A generic term used to represent a particular stock or financial instrument in theoretical examples.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility, and less than 1 indicates lower volatility.