Which of the Statements Below Is Correct When Comparing the Direct

question 44

Multiple Choice

Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?

• A) The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
• B) The indirect method starts with cash collected from customers and details cash inflows and outflows from operations.
• C) The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
• D) The net cash provided by or used in operations will be different depending on whether the direct or indirect method is useD.
• The indirect method starts with net income and makes adjustments, such as adding back depreciation, to arrive at the net cash provided by or used in operations. The direct method starts with cash collected from customers and details cash inflows and outflows from operations to arrive at the net cash provided by or used in operations. Both methods will arrive at the same net cash provided by or used in operations.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, expressed as the percentage change in quantity demanded divided by the percentage change in price.

Midpoint Formula

A method for calculating the percentage change in a variable by dividing the change by the average of the initial and final values, often used in economics to measure elasticity.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, in a given time period.

Elastic

In economics, elastic refers to how the quantity demanded or supplied of a good responds to changes in its price; high elasticity indicates sensitivity to price changes.