The Indirect Method Starts with Net Earnings and Converts Them

question 80

Multiple Choice

The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that:

• A) the indirect method starts with net earnings and adds back all of the expenses relating to operating activities.
• B) the indirect method adjusts net earnings for contra account balances.
• C) the indirect method calculates net earnings as the difference between net assets and net liabilities.
• D) the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.

Understand the reasons behind central banks' policy actions during economic crises and their immediate impacts on the financial system.

Comprehend the relationship between currency held by the nonbanking public, reserves within the banking system, and their implications for monetary policy.

Recognize the immediate accounting effects of central bank transactions on commercial banks' balance sheets.

Identify the primary assets and liabilities of the Federal Reserve and their significance in monetary policy implementation.

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