Under the Indirect Method for Preparing the Statement of Cash

question 112

Multiple Choice

Under the indirect method for preparing the statement of cash flows, decreases in current assets are _____ net income in the cash flows from operating activities section.

• A) subtracted from
• B) added to
• C) not used in calculating
• D) cannot tell from the information given

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Definitions:

Capital Intensive

Describes industries or businesses that require large amounts of money and equipment to produce goods or services.

Variable Costs

Expenses that fluctuate in direct proportion to changes in productive output or other measures of volume.

Operating Leverage

Operating leverage refers to the extent to which a company can increase its operating income by increasing revenue, highlighting the proportion of fixed costs in a company's cost structure.

Capital Intensive

A business process or industry that requires significant financial investment in capital assets like machinery and equipment, versus labor or operational costs.