The Indirect Method for the Preparation of the Operating Activities

question 52

Multiple Choice

The indirect method for the preparation of the operating activities section of the statement of cash flows:

• A)Separately lists each major item of operating cash receipts.
• B)Separately lists each major item of operating cash payments.
• C)Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.
• D)Is required if the company is a merchandiser.
• E)Must not be used in all circumstances.

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Definitions:

Organizational Hierarchy

The arrangement of individuals within a corporation according to power, status, and job function, creating a structure of ranks or levels.

Specialization

The process of focusing on and becoming an expert in a particular subject or skill.

Standardization

The process of implementing and developing technical standards to ensure uniformity, compatibility, safety, repeatability, or quality among products, services, or processes.

Centralization

The concentration of decision-making power and authority in the hands of a central body or a few individuals within an organization.