In Determining Net Cash Flow from Operating Activities, an Increase

question 13

Multiple Choice

In determining net cash flow from operating activities, an increase in merchandise inventory during a period ________.

• A) requires a subtraction adjustment to financing cash flows under the indirect method
• B) requires a subtraction adjustment to sales to customers under the direct method
• C) requires an addition adjustment to net income under the indirect method
• D) requires an addition adjustment to payments for merchandise under the direct method

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Definitions:

Equity

The value of an asset after deducting the cost of liabilities, representing the owner's interest in a company.

Investing Activities

Investing activities are financial transactions related to the acquisition or disposal of long-term assets and other investments not considered cash equivalents, as detailed in the statement of cash flows.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of the company, as reported in the statement of cash flows.

Accounts Payable

A company's financial liability to its suppliers or creditors for received goods and services.