Cash Flows from Operating Activities Can Be Calculated Using the Indirect

question 195

Essay

Cash flows from operating activities can be calculated using the indirect or direct method. Briefly describe how the two methods differ yet arrive at the same information about the net cash flows from operating activities.

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Definitions:

Reliable Factual Information

Information that is dependable and based on facts, thereby considered accurate and trustworthy.

Uncertainty

A state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Risk

The exposure to the chance of loss or damage, or the uncertainty regarding the outcome of an action or decision.

Certainty

The firm conviction that something is reliably true, without any doubt, often used in decision-making processes.