If the Calculation of Cash Flows from Operating Activities Starts

question 27

Multiple Choice

If the calculation of cash flows from operating activities starts with net income,the company:

• A)is using the net income method.
• B)will remove the effects of all noncash items included in the calculation of net income.
• C)is using the direct method.
• D)will add all noncash items not included in the calculation of net income.

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Definitions:

Semi-annually

Occurring twice a year, typically every six months.

Quarterly Payments

Payments made four times a year, typically used in the context of dividends or loan repayments.

Debt

An amount of money borrowed by one party from another, which needs to be repaid usually with interest.

Compounded Annually

Refers to the process where the interest on an investment or loan is calculated annually and added to the principal, so that the balance doesn't merely grow by the initial rate of interest but by the interest on the interest as well.