Which of the Following Are Limitations of a Statement of Cash

question 31

Multiple Choice

Which of the following are limitations of a statement of cash flows?
I. Only past cash flows are reported
II. Cash flows can be manipulated,e.g. postponing expenditures
III. Non-cash transactions can be significant in affecting future investing and financing cash flows

• A) I and II only
• B) II and III only
• C) I, II and III
• D) None are considered limitations.

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Definitions:

Cost-Volume-Profit Chart

A graphical representation that shows the relationship between a company's costs, sales volume, and profits.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how revenue growth translates into growth in operating income.

Variable Costing

A managerial accounting method that includes only variable production costs (materials, labor, and overhead) in product costs, treating fixed manufacturing overhead as an expense of the period.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.