When a Company Uses the Direct Method to Determine the Cash

question 5

Multiple Choice

When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

• A)be identical to the amount reported using the indirect method.
• B)be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
• C)always be larger than the amount reported using the indirect method.
• D)be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect method.

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Definitions:

Water-Jug Problems

A type of problem that tests one's ability to logically figure out how to measure exact amounts of water using jugs of different sizes.

Unnecessary Constraints

Limitations or restrictions that are not required and may hinder problem-solving or creativity.

Insight

A sudden and often novel realization of the solution to a problem; it contrasts with strategy-based solutions.

Arrangement

The act or process of putting things in a particular order or configuration.