Which of the Following Statements Is True of Indirect Methods

question 48

Multiple Choice

Which of the following statements is true of indirect methods of proof?

• A) The cash method, which has limited application, is feasible only when the number of units and price can be determined easily.
• B) When there is an accumulation of assets without a corresponding source of funds the unit and volume method is most commonly used.
• C) The bank deposit method is used when the subject (individual or business) consumes income rather than accumulates assets.
• D) Successful use of the net worth method requires a complete reconstruction of the subject's financial history, including all assets, liabilities, expenditures, and sources of funds.

---

Definitions:

Fixed Costs

Refers to costs that do not change in total regardless of the level of production or sales activity, like rent, salaries, and insurance.

Balanced Scorecard

A strategic planning and management system used to align business activities with the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals.

Performance Measurement

The process of evaluating how effectively and efficiently an organization or individual achieves its objectives.

Operating Assets

Assets used in the day-to-day operations of a business to generate revenue, excluding investments and non-operational assets.