Which of the Statements Below Is Correct When Comparing the Direct

question 110

Multiple Choice

Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?

• A)The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
• B)The indirect method starts with cash collected from customers and details cash inflows and outflows from operations.
• C)The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
• D)The net cash provided by or used in operations will be different depending on whether the direct or indirect method is used.

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Definitions:

Federal Government

The national government of a federal country, which holds the authoritative power to govern the nation as a whole, distinct from regional or state governments.

Medicare Program

A federal health insurance program in the United States for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.

Adverse Selection

A situation in which sellers have information that buyers do not (or vice versa) about some aspect of product quality.

Moral Hazard

The risk that one party to a transaction has not entered into the contract in good faith, or has provided misleading information about its assets, liabilities, or credit capacity.