As a Complement to the Balance Sheet and the Income

question 44

Multiple Choice

As a complement to the balance sheet and the income statement,the statement of cash flows is an informative statement for analysts for all the following reasons except:

• A) The statement of cash flows provides information to assess the financial health of a firm.Analysts increasingly recognize that cash flows do not necessarily track income flows.A firm with a healthy income statement is not necessarily financially healthy, and vice versa.Cash requirements to service debt, for example, may outstrip the ability of operations to generate cash.
• B) The existence of negative cash flows from operations can be eliminated by using this financial statement.
• C) The statement of cash flows highlights accounting accruals, which can provide insight into the overall sustainability and quality of a firm's reported earnings.
• D) Analysts who understand the types of information this statement presents and the kinds of interpretations that are appropriate find that the statement of cash flows reveals information about the economic characteristics of a firm's industry, its strategy,
• And the stage in its life cycle.

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Definitions:

Bushings

Mechanical components used to reduce friction between rotating shafts and stationary support members, often serving as a replaceable lining.

Metric Thread

A standardized thread type used internationally, characterized by its metric dimensions, commonly used in bolts, screws, and nuts.

Internal Thread

The spiral grooves cut inside a hole intended to engage with an external thread, such as on a bolt, allowing for parts to be screwed together.

Plain Bearings

Bearings that operate through sliding motion between the moving surfaces, without rollers or balls, used for simpler mechanisms.