What Is the Starting Point for Calculating Cash Flows from Operations

question 218

Multiple Choice

What is the starting point for calculating cash flows from operations when the indirect method is used?

• A)Net income from the income statement.
• B)Calculate the net change in the cash account.
• C)Add the change in accounts receivable to sales revenue.
• D)Identify the balance sheet accounts that relate to operating activities.

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Definitions:

Fixed Assets

Long-term assets purchased for operating the business, not expected to be converted to cash within a year.

Investing Activities

Deals that include buying and selling assets with long-term value and investments outside of cash equivalents.

Operating Activities

Business actions related directly to the production and delivery of goods and services, reflected in the cash flow statement.

Investing Activities

Transactions and events that involve the purchase or sale of long-term assets and investments, a component of a company’s cash flow statement.