A Company Uses the Indirect Method to Prepare the Statement

question 52

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. In determining the net cash flow from operating activities, which of the following items would be added to net income?

• A)An increase in dividends paid would be added to net income.
• B)An increase in accrued liabilities would be added to net income.
• C)A decrease in accounts payable would be added to net income.
• D)A gain on the sale of land would be added to net income.

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Definitions:

Formal Chains

A term that might refer to the standard or established processes and hierarchies within organizations or systems, ensuring consistency and order.

Strategically Analyzing

The process of assessing various elements and conditions impacting an organization or situation to formulate effective strategies.

Bankruptcy

A legal process involving a person or business that is unable to repay outstanding debts, resulting in the distribution of assets to creditors and possibly leading to the discharge of debts.

Liquidation

The process of closing a business and distributing its assets to claimants, typically during insolvency, paying creditors, and shareholders if funds remain.