In Preparing the Statement of Cash Flows by the Indirect

question 105

Multiple Choice

In preparing the statement of cash flows by the indirect method,which of the following is a correct statement of one of the general rules to convert net income to a cash-basis equivalent?

• A) Losses on the sale of long term assets are subtracted from net income.
• B) All non-cashnoncash expenses and losses are subtracted from net income.
• C) Increases in current assets are subtracted from net income.
• D) Decreases in current liabilities are added to net income.

---

Definitions:

Existing Copier

A copier machine that is currently owned or in use within an organization.

Evaluation

The process of examining and judging something's value, quality, or importance.

Net Working Capital

Net Working Capital is a measure of a company's short-term financial health, calculated as current assets minus current liabilities.

Present Value

The contemporary valuation of future financial inflows or a lump sum, adjusted for a specific rate of return.