When Preparing the Note Attached to the Cash Flow Statement

question 2

Multiple Choice

When preparing the note attached to the cash flow statement reconciling profit and cash flow from operations, losses incurred from the sale of non-current assets are:

• A) added back to the profit.
• B) subtracted from the profit.
• C) do not appear in the reconciliation.
• D) sometimes added back to the profit and sometimes subtracted from the profit depending on whether a loss or profit on disposal is incurred.

Grasp the significance of optimal plant size and its dependence on expected output levels.

Appreciate the economic rationale behind the cost structures of firms and the implications for resource allocation.

Understand the concepts of explicit and implicit costs and their role in production.

Differentiate between economic profit and accounting profit, including the inclusion of opportunity costs.

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Definitions:

Treasury Stock

Treasury stock refers to previously issued shares that have been repurchased by the issuing company, reducing the amount of outstanding stock on the open market.

Financing Activities

Transactions involving external sources of funding, including debts, dividends, and sale or repurchase of shares.

Income Tax Expense

represents the cost associated with taxes on a company's income, taking into account both current and deferred tax obligations.

Direct Method

A cash flow statement presentation that lists specific operating cash receipts and payments, straightforwardly showing sources and uses of cash.