If a Company Uses the Indirect Method to Determine Cash

question 11

Multiple Choice

If a company uses the indirect method to determine cash flows from operating activities,gains:

• A)must be added to net income and losses subtracted from net income.
• B)and losses must be added to net income.
• C)must be subtracted from net income and losses added to net income.
• D)and losses must be subtracted from net income.

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Annual Net Cash Inflow

The net amount of cash that flows into a company within a one-year period after all expenditures are subtracted.

Residual Value

The estimated amount for which an asset is expected to be sold at the end of its useful life, after deducting expected costs of disposal.

Useful Life

Useful life is the estimated period that an asset is expected to be usable for its intended purpose, influencing depreciation and amortization calculations.