When Preparing the Operating Section of the Statement of Cash

question 164

Multiple Choice

When preparing the operating section of the statement of cash flows using the direct method, which of the following statements is true?

• A) An increase in accounts payable is added to expenses.
• B) An increase in accounts receivable is added to sales.
• C) Depreciation expense is deducted from cash flows.
• D) Gains on sales of long-term assets are omitted from cash flows.

---

Definitions:

Cournot Duopolists

Firms in a duopoly market structure, where two companies dominate, that decide on their output level assuming the other's output as given, under Cournot competition.

Demand Curve

Illustrates the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at each price level.

Total Costs

The combined total of fixed and variable costs involved in the manufacturing of goods or services.

Daily Profit

The financial gain a business makes in a single day, calculated by subtracting total expenses from total revenue for that day.