In a Typical Cash Flow Statement, Prepared Using the Indirect

question 64

Multiple Choice

In a typical cash flow statement, prepared using the indirect method, which of the following statements about depreciation is correct?

• A) Depreciation expense usually appears in the investing section, as a reduction to investing cash flows.
• B) Depreciation expense usually appears in the investing section, as an addition to investing cash flows.
• C) Depreciation expense usually appears in the operating section, as a reduction to operating cash flows.
• D) Depreciation expense usually appears in the operating section, as an addition to operating cash flows.

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Definitions:

Raw Materials Inventory

The total cost of all components and materials a company holds that are yet to be used in the manufacturing process.

Direct Material

Direct Material refers to the raw materials that can be directly attributed to the production of goods, clearly identifiable and quantifiable.

Production Needs

Refers to the resources and requirements necessary to manufacture goods or provide services, including materials, labor, and machinery.

Merchandise Purchases Budget

A financial plan that estimates the cost of inventory a business needs to buy to meet its sales goals.