Which of the Following Statements Regarding Use of the Direct

question 79

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.The FASB recommends use of the direct method.

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Definitions:

Maximum Daily Production

The highest quantity of goods or services a company can produce in a single day under normal operating conditions.

Managerial Accounting

The phase of accounting concerned with providing information to managers for use within the organization.

Historical Perspective

An approach to understanding and analyzing events or subjects based on their development over time.

Just-In-Time (JIT) System

A production strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs through the timely creation or acquisition of materials.