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:

Systems Design

The process of defining the architecture, components, modules, interfaces, and data for a system to satisfy specified requirements.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into known amounts of cash with original maturities of three months or less.

Highly Liquid

Describes assets that can be quickly and easily converted into cash with minimal impact on their value.

Vouchers

Documents that serve as evidence of a transaction and propose a future payment, detailing the conditions and amounts to be paid.