When the Indirect Method Is Used to Determine Operating Cash

question 46

Multiple Choice

When the indirect method is used to determine operating cash flows,how is depreciation expense recorded on the statement of cash flows?

• A) as an operating activity
• B) as an investing activity
• C) as a financing activity
• D) as a noncash investing and financing activity

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Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs of a product, used to cover fixed costs and generate profit.

Return On Investment

An evaluation metric employed to assess the effectiveness or financial gain of an investment, or to compare the effectiveness among several investments.

Manufacturing Cycle Efficiency

A metric that measures the efficiency of the manufacturing process by comparing value-added time to total throughput time.

Turnover

This is a measure of how quickly inventory is sold or how often employees are replaced within a business.