Consider the Following Cash Flow Items

question 68

Multiple Choice

Consider the following cash flow items:
Pay amount owed to bank for previous borrowing.
Pay utility costs.
Purchase equipment to be used in operations.
Purchase office supplies.
Purchase one year of rent in advance.
Pay workers' salaries.
Pay for research and development costs.
Pay taxes to the IRS.
Sell common stock to investors.
How many of these cash flow items involve financing activities?

• A) Zero.
• B) One.
• C) Two.
• D) Three.

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Definitions:

Differential Cost

The variance in expenses resulting from choosing between two options or adjustments in production amounts.

Operating Capacity

The maximum output or production level a company can sustain with its current resources, such as machinery and labor, over a specific period.

Unused Capacity

Resources or production potential that remains unutilized or is not being used to its full extent.

Opportunity Cost

The cost of the next best alternative that is foregone when a decision is made to choose one option over others.