GAAP Allows the Use of Either the Direct or Indirect

question 107

True/False

GAAP allows the use of either the direct or indirect methods but prefers the direct method, but companies who use the indirect method must also include a separate schedule reconciling its net income to net cash flow provided by operating activities.

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Definitions:

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, indicating the degree of variation from the average.

Hedge Ratio

A ratio used to calculate the number of derivatives needed to hedge a particular position, aiming to provide protection against adverse price movements.

Dollar Change

The difference in the price of a security from one trading period to the next, expressed in dollars.