Which of the following is NOT true of the statement of cash flows? A)

QUESTION

Which of the following is NOT true of the statement of cash flows?

A) It reveals the firm’s cash receipts.
B) It shows disbursement related to the firm’s operating activities.
C) It shows disbursement related to the firm’s investing activities.
D) It reports over a defined period of time.
E) It determines the gross profit for the firm.

ANSWER

Answer: E
Explanation: E) The statement of cash flows reports over a period of time, first, the firm’s cash receipts and, second, disbursement related to the firm’s (1) operating, (2) investing, and (3) financing activities, which leads to the bottom line of (4) the cash balance. It does NOT determine the firm’s gross profit.