Which of the Following Statements Is True of the Direct

question 52

Multiple Choice

Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?

• A)The indirect method and the direct method will produce the same amount of net cash flow from operating activities.
• B)The direct method begins with Net Income and adjusts to calculate operating and investing cash flows.
• C)The indirect method shows three types of cash flows, but the direct method does not.
• D)The operating activities section of both the direct and the indirect methods are the same.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to buy.

Perfectly Elastic

A situation in economic theory where the quantity demanded or supplied responds infinitely to changes in price.

Perfectly Inelastic

A situation in which the demand for a good or service does not change in response to changes in price.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with higher elasticity indicating greater responsiveness.