In Preparing the Operating Activities Section of the Statement of Cash

question 27

Multiple Choice

In preparing the operating activities section of the statement of cash flows, most companies in Canada prefer to

• A)use the direct method.
• B)use the indirect method.
• C)present both the indirect and direct methods in their financial reports.
• D)prepare the operating activities section on the accrual basis.

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Definitions:

Divergent Thinking

An approach or technique adopted to produce innovative ideas through the examination of numerous potential answers.

Convergent Thinking

A cognitive process in which multiple pieces of information are combined to solve a problem or come up with a single, correct solution.

Functional Fixedness

A cognitive bias that limits a person to use an object only in the way it is traditionally used, hindering the ability to see alternative uses.

Standardization

The development of uniform procedures for administering and scoring a test, and the creation of norms (performance standards) for the test.