When a Company Uses the Direct Method to Determine the Net

question 42

Multiple Choice

When a company uses the direct method to determine the net cash flows from operating activities, cash flows from operating activities will:

• A) be identical to the amount reported using the indirect method.
• B) be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
• C) always be larger than the amount reported using the indirect method.
• D) be larger if there is a net cash outflow and smaller if there is a net cash inflow co mpared to the amount reported using the indirect method.

Understand the fundamental components of the FASB conceptual framework.

Identify and describe the common forms of business ownership and their characteristics.

Recognize the role and influence of regulatory bodies like the SEC and IASB on accounting practices.

Understand the significance and application of the accounting equation.

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Definitions:

Sample Size

The number of observations or elements selected from a population to be included in a statistical sample.

Reduce β

In statistics, it generally refers to decreasing the coefficient (β) in a regression model to address overfitting or multicollinearity.

Power of the Test

The probability of correctly rejecting a false null hypothesis in a statistical test.

Test Statistic

A value calculated from sample data during a hypothesis test, used to decide whether to reject the null hypothesis.