The Indirect Method of Preparing the Operating Section of the Statement

question 51

Multiple Choice

The indirect method of preparing the operating section of the statement of cash flows:

• A)produces the same figure for cash from operating method as the direct method.
• B)uses different computations than the direct method.
• C)does not affect investing or financing activities.
• D)is all of the above.

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Definitions:

Unrealized Gain

An increase in the value of an asset or investment that has not yet been sold and thus, the gain has not been realized as actual profit.

Consolidated Financial Statements

Financial statements that show the financial results and position of a parent company and its subsidiaries as if they were a single entity.

Wholly Owned Subsidiary

A firm entirely possessed by another corporation, known as the parent company, holding all of its share capital.

Non-Controlling Interest

A ownership stake in a corporation where the holding gives the investor less than 50% voting power.