If the Calculation of Net Cash Flows from Operating Activities

question 24

Multiple Choice

If the calculation of net cash flows from operating activities starts with net income,the company:

• A)is using the net income method.
• B)will then remove all noncash items included in the calculation of net income.
• C)is using the direct method.
• D)will then add all additional noncash items not included in the calculation of net income.

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Definitions:

Profit Margin

A financial metric expressed as a percentage, indicating how much of each dollar in revenue is translated into profit.

Market-to-Book Ratio

A comparison of a company's current market value to its book value, used to assess whether a stock is under or overvalued.

Price-Earnings Ratio

A valuation metric for companies, calculated by dividing the current market price of a stock by its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Book Value Per Share

Book value per share is a financial measure that quantifies the actual value of a company’s stock based on historical costs, expressed as the company's total net assets divided by the number of outstanding shares.