Which of the Following Statements Regarding Use of the Direct

question 59

Multiple Choice

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect?

• A)The indirect method starts with net income.
• B)The direct method calculates cash collected from customers.
• C)The majority of U.S.companies use the indirect method.
• D)The FASB recommends use of the indirect method.

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Definitions:

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good supplied by producers.

Tax Subsidy

A government benefit that effectively reduces the tax that a business or individual owes.

Excise Tax

A tax imposed on specific goods, services, or transactions, typically including alcohol, tobacco, and fuel, aimed at raising government revenue or affecting consumption patterns.

Price Paid

The amount of money exchanged for a good or service in a transaction.