The Cash Flow from Operating Activities Is Calculated in the Same

question 126

True/False

The cash flow from operating activities is calculated in the same way, whether the company uses the direct or the indirect method of preparing the statement of cash flow. The only difference is the way the financing activities section is prepared.

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Definitions:

Surplus Cash

Excess cash that a company holds over and above the minimum operational funds required, often used for investment, dividends, or buybacks.

Lockbox System

A service offered by banks to companies for the collection of payments from customers, wherein the payments are sent directly to a post office box, thereby speeding up collection times.

Processing Time

The amount of time required to complete a specific process or task, often related to manufacturing or computational operations.

Preauthorized Payment

A financial arrangement that allows a business or individual to automatically debit funds from a customer's bank account for recurring expenses.