Why Is an Analysis of the Pattern and Variability of the Investing

question 6

Multiple Choice

Why is an analysis of the pattern and variability of the investing company's cash flows so important as part of the short-term investment process?

• A)it guides dollar amounts and maturities of investments
• B)it insures that state and federal regulations are met
• C)it protects the investment manager against shareholder lawsuits
• D)it ensures that the company's brokers and banks do not trick the company into making overly risky investments

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Definitions:

Cost of Goods Sold

The total cost of manufacturing or acquiring the products sold by a company during a specific period.

Beginning Inventory

The value of goods available for sale at the start of an accounting period, prior to any purchases or sales being recorded.

Ending Inventory

The value or volume of inventory remaining at the end of an accounting period after sales and adjustments.

Average Inventory

The mean stock held by a company over a certain period, calculated by adding the beginning and ending inventory and then dividing by two.