When the Direct Method Is Used to Determine the Cash

question 215

Multiple Choice

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to income tax expense to determine total income tax payments?

• A)Add all changes in income taxes and income taxes payable.
• B)Add decreases in income taxes payable and subtract increases in income taxes payable.
• C)Add increases in income taxes payable and subtract decreases in income taxes payable.
• D)Subtract all changes in income taxes payable.

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Definitions:

Leverage

The use of various techniques or borrowed capital (debt) to increase the potential return of an investment.

Outsourcing

Transferring a firm’s activities that have traditionally been internal to external suppliers.

External Suppliers

Third-party companies or entities that provide products or services to another company as part of the supply chain, outside of the purchasing company's organization.

Many-Suppliers Strategy

A procurement approach where a company sources its materials or products from a large number of suppliers to enhance competition and reduce supply risk.