When a Company Uses the Direct Method to Determine the Cash

question 5

Multiple Choice

When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

• A)be identical to the amount reported using the indirect method.
• B)be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
• C)always be larger than the amount reported using the indirect method.
• D)be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect method.

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Definitions:

WARP

The Weak Axiom of Revealed Preference (WARP) is a criterion used to check for consistency in consumer choice behavior under the assumption of rationality.

Bundle

A set of goods or services sold together as a single package.

Revealed Preferences

An economic theory that determines consumer preferences by observing their purchasing behavior rather than through direct inquiry.

Francs

A currency unit formerly used in France and some other countries, and still used in some territories.