Excerpts from Neuwirth Corporation's Comparative Balance Sheet Appear Below

question 111

Multiple Choice

Excerpts from Neuwirth Corporation's comparative balance sheet appear below: Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?

• A) The change in Accounts Receivable is added to net income; The change in Inventory is added to net income
• B) The change in Accounts Receivable is added to net income; The change in Inventory is subtracted from net income
• C) The change in Accounts Receivable is subtracted from net income; The change in Inventory is subtracted from net income
• D) The change in Accounts Receivable is subtracted from net income; The change in Inventory is added to net income

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Definitions:

Average Total Cost

The per-unit cost of production, obtained by dividing total costs by the total quantity of goods or services produced.

Marginal Cost

The expenditure for assembling another unit of a product or service.

Short-Run Equilibrium

A state in which market supply and demand balance each other, and as a result, prices become stable for a short period.

Constant Returns

A situation in economics where increasing the scale of production does not affect the long-run average cost of production, implying it remains constant.