According to the Statement of Cash Flows,an increase in interest expense will _____ the cash flow from _____ activities.
A)decrease; operating
B)decrease; financing
C)increase; operating
D)increase; financing
E)increase; investment

Question

Quizplus · Accepted Answer

An increase in interest expense is associated with paying interest on debt, which is a financing activity rather than an operating or investment activity. However, since interest expense is deducted from net income in the operating activities section to arrive at net cash flow from operating activities, an increase in interest expense will decrease the cash flow from operating activities.

According to the Statement of Cash Flows,an Increase in Interest