In Determining Net Cash Flow from Operating Activities,an Increase in Merchandise

question 155

Essay

In determining net cash flow from operating activities,an increase in merchandise inventory during a period ________.
A)requires a subtraction adjustment to financing cash flows under the indirect method
B)requires a subtraction adjustment to sales to customers under the direct method
C)requires an addition adjustment to net income under the indirect method
D)requires an addition adjustment to payments to suppliers under the direct method

• A)requires a subtraction adjustment to financing cash flows under the indirect method
• B)requires a subtraction adjustment to sales to customers under the direct method
• C)requires an addition adjustment to net income under the indirect method
• D)requires an addition adjustment to payments to suppliers under the direct method

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Definitions:

Variable Expenses

Expenditures that fluctuate in alignment with the quantity of production or sales figures, like labor costs and materials used.

Traceable Fixed Expenses

Fixed expenses that can be directly linked to a specific segment of a business and would disappear if the segment did not exist.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Variable Expenses

Costs or expenses that change in proportion to business activity levels or volume, such as sales commissions or raw material costs.