The Indirect Method of Preparing the Statement of Cash Flows

question 43

Multiple Choice

The indirect method of preparing the statement of cash flows ________.

• A)is preferred by business over the direct method
• B)provides greater clarity for users than the direct method
• C)reports a greater amount of cash than the direct method
• D)starts by converting net income into an accrual-based number

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Definitions:

Planning Gap

The difference between future desired performance and the projection of future performance, if current operations continue, often leading to the development of strategies to bridge the gap.

Sales Revenue Goal

A set financial target for the amount of income generated from the sale of products or services within a specific time frame.

Projection Path

A series of steps or actions that an entity anticipates or plans to take in order to achieve specific objectives or outcomes.

Total Costs

The complete amount of money spent on the production, operation, and distribution of a product or service, including both fixed and variable expenses.