The Additional Inventory Investment That Is Often Required for New

question 61

Multiple Choice

The additional inventory investment that is often required for new projects can be partially funded by:

• A)Switching to accelerated depreciation methods
• B)Reducing accounts receivable
• C)Decreasing equipment purchases
• D)Increasing accounts payable

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Definitions:

Indirect Method

This approach is used in cash flow statements to report net income and adjust it for changes in assets and liabilities that affect cash but are not cash transactions themselves.

Depreciated Equipment

Assets that have undergone depreciation to reflect the reduction in value due to wear and tear, age, or obsolescence.

Statement of Cash Flows

An accounting statement detailing collective cash receipts from operational businesses and external investments, plus cash expenses for business and investment activities over a designated period.

Operating Activities

Operating Activities involve the core business processes and transactions related to producing and delivering goods and services, typically reflected in the cash flow statement.