Assume a Company Uses the Direct Method to Prepare Its

question 136

Multiple Choice

Assume a company uses the direct method to prepare its statement of cash flows.If the company's inventory and accounts payable both increase during the accounting period,how would these changes affect cash flow calculations?

• A)The changes in each account are both added to net income.
• B)The change in inventory is subtracted from cost of goods sold and the change in accounts payable is added to cost of goods sold to find the cash paid to suppliers.
• C)The changes in each account are both subtracted from net income.
• D)The change in inventory is added to cost of goods sold and the change in accounts payable is subtracted from cost of goods sold to find the cash paid to suppliers.

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Definitions:

Procedural Flexibility

The ability to adapt the processes and rules of an organization or system to accommodate different situations or requirements.

Continuous Process Improvement

An ongoing effort to enhance products, services, or processes by making incremental improvements over time.

Corporate Culture

The shared values, beliefs, and practices that characterize an organization and influence its employees' behavior and attitudes.

Job Control Unionism

A labor movement strategy focusing on gaining control over work conditions, job distribution, and employment terms through collective bargaining.