In Calculating Net Cash Provided by Operating Activities Using the Indirect

question 23

Multiple Choice

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

• A)deducted from net income.
• B)added to net income.
• C)ignored because it does not affect net income.
• D)ignored because it does not affect expenses.

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Definitions:

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, often used as a reference point for various types of loans.

Rate Of Interest

The percentage at which interest is charged or paid over a specific period of time on borrowed or saved money.

Unsecured Loan

A loan that is issued and supported only by the borrower's creditworthiness, without any collateral.

Short-Term Loan

A type of loan that is scheduled to be repaid in less than a year.