Interest expense appears in the operations section of the statement of cash flows because:
A) firms cannot operate without incurring interest expense.
B) its payment is not within managerial discretion.
C) it is paid to finance a firm's inventory.
D)none of these; interest expense appears in the financing section of the statement of cash flows.

Question

Quizplus · Accepted Answer

Interest expense is included in the operations section of the statement of cash flows because it represents a cost of doing business that is necessary to generate revenue. The payment of interest is not within managerial discretion as it is usually the result of borrowing money to finance operations or invest in assets. It is not paid to finance a firm's inventory, and it does not appear in the financing section of the statement of cash flows.

Interest Expense Appears in the Operations Section of the Statement