When Preparing the Operating Section of the Statement of Cash

question 8

Multiple Choice

When preparing the operating section of the statement of cash flows using the direct method,which of the following statements is true?

• A)An increase in accounts payable is added to expenses.
• B)An increase in accounts receivable is added to sales.
• C)Depreciation expense is added to cash flows.
• D)Gains on sales of long term assets are subtracted from cash flows.

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Definitions:

Inventory Turnover Ratio

A financial metric indicating how many times a company's inventory is sold and replaced over a specific period, often used to assess the efficiency of inventory management.