When Auditing the Statement of Cash Flows of a Profitable

question 7

Multiple Choice

When auditing the statement of cash flows of a profitable, growing company which combination is most likely? $$\begin{array} { | l | l | l | } \hline & \text { Cash fows from operations } & \text { Cash flows from imesting } \\\hline \text { A. } & \text { Positive } & \text { Positive } \\\hline \text { B. } & \text { Positive } & \text { Negative } \\\hline \text { C. } & \text { Negative } & \text { Positive } \\\hline \text { D. } & \text { Negative } & \text { Negative } \\\hline\end{array}$$

• A) Option A
• B) Option B
• C) Option C
• D) Option D

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Definitions:

Incremental Income

The additional income that is generated as a result of a specific business decision or activity.

Incremental Costs

Additional costs associated with producing one extra unit of a product or delivering an additional service.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced to the finished product.

Direct Labor

The cost of labor that can directly be associated with the production of goods or services.