When Preparing the The Operating Section Using the Direct Method,which

question 78

Multiple Choice

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

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

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Definitions:

Total Asset Turnover

A financial ratio that measures a company's effectiveness in using its assets to generate sales or revenue.

Full Capacity

The highest amount of production a business can maintain for an extended time without needing to raise its fixed expenses.

Capacity

The maximum level of output that a company can sustain to make a product or provide a service, taking into account current resources and facilities.

Short Run

A time period in economics during which at least one input is fixed while others may be variable, affecting the production and costs of a business.