Under the Indirect Method, Changes in Current Assets Are Used

question 121

True/False

Under the indirect method, changes in current assets are used in determining net cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities.

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Definitions:

Annual Net Cash Inflow

The net amount of cash that flows into a company in a year after all expenses and outflows have been subtracted from total inflows.

Capital Rationing

The process of selecting the most profitable projects to invest in when a company has limited resources or capital available.

Present Value

The present value of anticipated future cash flows or sums of money, calculated with a given rate of earnings.

Net Cash Flow

The difference between a company's cash inflows and outflows during a specific period, providing insight into its financial health and liquidity.