If a Company Uses the Indirect Method to Prepare the Statement

question 165

Multiple Choice

If a company uses the indirect method to prepare the statement of cash flows, which of the following items would be added to net income in determining the net cash flow from operating activities?

• A)An increase in inventory would be added to net income.
• B)A decrease in accounts receivable would be added to net income.
• C)A decrease in accounts payable would be added to net income.
• D)An increase in preferred dividends payable would be added to net income.

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Definitions:

Offshoring

The practice of relocating company operations or functions to another country to reduce costs or access skilled labor.

Multinational Corporation

A company that operates in multiple countries, managing production or delivering services in more than one country.

Labor Cost

The total expense incurred by employing labor, including wages, salaries, and benefits.

Private Enterprise System

A private enterprise system is an economic system where private individuals or businesses own and operate the means of production and distribution of goods and services.