A Company Uses the Indirect Method to Prepare the Statement

question 119

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. How can amortization be presented on the statement of cash flows?

• A)Amortization expense can be added to net income in the financing activities section on the statement of cash flows.
• B)Amortization expense can be subtracted from net income in the operating section on the statement of cash flows.
• C)Amortization expense can be added to net income in the operating activities section on the statement of cash flows.
• D)Amortization expense can be added to net income in the investing activities section on the statement of cash flows.

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Definitions:

Interpretation

Interpretation involves the process of explaining the meaning of information or data, often requiring a detailed analysis to translate complex information into more understandable terms.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its most liquid assets, without relying on inventory.

Debt Ratio

A financial ratio that measures the proportion of total debt to total assets, indicating the company's leverage and financial health.

Equity Ratio

A financial ratio indicating the proportion of shareholder equity as a part of the total assets owned by a company.