The Direct Method for the Preparation of the Operating Activities

question 58

Multiple Choice

The direct method for the preparation of the operating activities section of the statement of cash flows

• A)Separately lists each major item of operating cash receipts
• B)Separately lists each major item of operating cash payments
• C)Separately lists each major item of operating cash receipts and cash payments
• D)Reports profit and then adjusts it for items necessary to determine net cash provided or used by operating activities
• E)All of these

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Definitions:

Incremental Benefits

The additional benefits associated with a particular decision or action, compared to not taking that action.

Variable Production Costs

Costs that fluctuate with the level of output, including expenses like raw materials and direct labor.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including lease payments, wages, and insurance fees.

Gross Profit

The difference between a company's sales revenue and its cost of goods sold, representing the profit made before accounting for operating expenses.