In Calculating Net Cash Provided by Operating Activities Using the Indirect

question 15

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 income.
• D)ignored because it does not affect expenses.

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Definitions:

Opportunity Cost

The value of the next best alternative that is foregone when a decision is made to choose one option over another.

Leisure Time

Free time in which an individual is not working, is not engaged in compulsory activities, and can choose activities for relaxation, enjoyment, or other personal development.

Labor Market

The supply of available workers in relation to available work, and the dynamics of wages, employment, and income.

Households

Entities comprising one or more persons who live together and make joint decisions about consumption and other aspects of their lives; considered a basic unit in economics for analysis of consumption patterns.