A Company with Substantial Operating Profits Prepares Its Statement of Cash

question 18

Multiple Choice

A company with substantial operating profits prepares its statement of cash flows using the indirect method.The gain on the sale of a long-term investment should be disclosed separately as a(n)

• A) inflow from operating activities.
• B) adjustment to net income in the reconciliation of net income to cash from operating activities.
• C) inflow from investing activities.
• D) outflow from investing activities.

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Definitions:

Rational Expectations

The hypothesis that individuals form forecasts about the future based on all available information in an unbiased and consistent manner.

Self-Correction Mechanism

The market's ability to adjust back to equilibrium without intervention, often used in the context of economic cycles.

Supply-Side Economists

Economists who advocate for policies that increase production as the best way to foster economic growth, emphasizing the role of supply in driving economic outcomes.

Tax Rates

The percentage at which an individual or corporation is taxed by the government on income or profits.