Which of the Following Statements About Calculation of Cash Flows

question 177

Multiple Choice

Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

• A)When the indirect method is used,changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities.
• B)When the indirect method is used,depreciation expense is added to net income as a step in the process of calculating net cash flow provided by operating activities.
• C)When the indirect method is used,changes in long-term assets are added to convert net income to net cash flow provided by operating activities.
• D)When the indirect method is used,changes in long-term liabilities are subtracted to convert net income to net cash flow provided by operating activities.

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Definitions:

Monitoring Costs

Expenses associated with the oversight and management of investments or other financial activities to ensure compliance and performance objectives.

Bonding Costs

Expenses associated with obtaining bonds that guarantee the performance of a contract or the fulfillment of an obligation.

Shareholders

Individuals or entities that own shares in a corporation, thereby having an equity stake in the company's assets and profits.

Claim Dilution

The reduction in the likelihood or potential value of a claim, which can happen when a company issues additional shares or when other circumstances decrease the value of existing claims.