Which of the Following,under the Indirect Method,is Not a Proper

question 94

Multiple Choice

Which of the following,under the indirect method,is not a proper adjustment to net income to arrive at cash flow from operations?

• A)Adding a decrease in inventory
• B)Adding an increase in salaries payable
• C)Deducting a increase in prepaid expense
• D)All are proper adjustments to net income.

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Definitions:

Net Income

The total profit of a company after subtracting all expenses, taxes, and costs from total revenue.

Statement Of Cash Flows

A financial statement that highlights the major activities that impact cash flows and, hence, affect the overall cash balance.

Operating Activities

These involve the primary day-to-day activities of a business, such as sales and the purchase of goods or services, which are reflected in its cash flow.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, allowing for analysis of trends in assets, liabilities, and equity.