Which of the Following Is Not True Regarding Cash Flows

question 101

Multiple Choice

Which of the following is not true regarding cash flows?

• A) Operating activities include the payment of dividends.
• B) Investing activities involve long-term investments.
• C) Financing activities involve long-term liabilities and equities.
• D) Purchasing a building with a note is considered a noncash activity.

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Definitions:

Levered Firms

Companies that employ debt (loans or bonds) in their capital structure alongside equity (stocks).

Unlevered Firms

Companies that operate without using debt or borrowed capital in their capital structures.

Financial Distress Cost

Expenses associated with a company struggling financially, including legal fees, restructuring costs, and impaired ability to conduct business.

Leverage

The use of borrowed capital or debt to increase the potential return of an investment.