When Using the Indirect Method to Prepare the Operating Activities

question 83

Multiple Choice

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is an increase in noncash current assets handled?

• A)It is subtracted from net income in the cash flows from operating activities section.
• B)It is subtracted from current liabilities in the cash flows from financing activities section.
• C)It is added to net income in the cash flows from operating activities section.
• D)It is added to equipment purchases in the cash flows from investing activities section.

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Definitions:

Make to Stock

A production strategy where products are manufactured in anticipation of demand, based on forecasts, and stored in inventory.

Pull Manufacturing

A production strategy where work is only initiated as per demand, aiming to reduce inventory levels and increase efficiency.

Make to Order

is a manufacturing process in which production starts only after a customer's order is received.

Lead Times

The amount of time that passes from the initiation of a process to its completion.