Which of the Following Would Be a Reasonable Short-Cut Approach

question 41

Multiple Choice

Which of the following would be a reasonable short-cut approach to calculating cash from operations?

• A)Net income plus amortization
• B)Net income minus amortization
• C)Net income plus the increase in accounts receivable
• D)Net income minus the increase in accounts receivable

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Definitions:

Indirect Method

A cash flow statement preparation method that adjusts net income for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Accounts Payable

Liabilities owed to vendors or suppliers for goods or services received that haven't been paid for yet.

Net Income

It refers to the bottom line of a company's income statement, indicating the earnings after all deductions.

Noncash Activities

Financial transactions that do not involve the immediate transfer of cash, often reflected in supplemental disclosures in cash flow statements.