In Preparing a Statement of Cash Flows, Which of the Following

question 45

Multiple Choice

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?

• A) Sale of merchandise on credit
• B) Declaration of a cash dividend
• C) Issuance of bonds payable at a discount
• D) Sale of equipment at book value

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Definitions:

Bond-Yield-Plus-Risk-Premium

A method of estimating the cost of equity by adding a risk premium to the observed yield of a company’s long-term debt.

WACC

An assessment of a firm's cost of capital, where each category of capital is proportionally weighted to calculate the average cost.

Marginal Costs

Marginal costs refer to the change in total cost that arises when the quantity produced is incremented by one unit.

Target Capital Structure

Target capital structure is the proportional combination of debt, equity, and other financing sources a company aims to maintain.