Which of the Following Is a Correct Adjustment to Derive

question 27

Multiple Choice

Which of the following is a correct adjustment to derive cash flow from the net income figure for a firm?

• A)subtract any increase in accounts payable
• B)subtract any decrease in accounts receivable
• C)add any increase in accounts payable
• D)add any increase in inventory

---

Definitions:

Variable Cost

Costs that vary in direct proportion to changes in the level of production or sales activity.

Fixed Costs

Costs that do not fluctuate with the level of production or sales activity, such as rent, salaries, and insurance premiums, remaining constant regardless of business volume.

Break-Even

The point at which total revenues equal total costs, leading to neither a profit nor a loss.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, used to cover fixed costs and to generate profit.