Multiple Choice
Which of the following capital budgeting methods focus on cash flows rather than incremental operating income?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Which of the following best defines a financial intermediary?
A
A company that prepares and analyzes financial statements for internal management use.
B
An entity that acts as a middleman between savers and borrowers, facilitating the flow of funds in the financial system.
C
An individual who audits the financial records of a business.
D
A government agency responsible for setting accounting standards.
Verified step by step guidance1
Step 1: Understand the term 'financial intermediary' by breaking it down. A financial intermediary is an entity that facilitates the flow of funds between savers (those who have excess funds) and borrowers (those who need funds).
Step 2: Compare the options provided in the question. Analyze each option to determine which one aligns with the definition of a financial intermediary.
Step 3: Option A describes a company that prepares and analyzes financial statements for internal management use. This is related to internal accounting processes, not the role of a financial intermediary.
Step 4: Option C refers to an individual who audits financial records. Auditing is a separate function focused on verifying the accuracy of financial statements, not facilitating fund flow.
Step 5: Option D mentions a government agency responsible for setting accounting standards. This is related to regulatory functions, not the intermediary role. The correct answer is the option that defines an entity acting as a middleman between savers and borrowers.
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