The Indirect Method of Preparing the Statement of Cash Flows

question 17

Multiple Choice

The indirect method of preparing the statement of cash flows:

• A) is more commonly used in practice than the direct method
• B) is preferred by the Accounting Standards Board over the direct method
• C) produces a different amount for cash flows from operating activities than the direct method
• D) produces a different amount for cash flows from investing activities than the direct method

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Definitions:

Elastic

Elastic refers to the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.

Price Elasticity

Price elasticity refers to the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.

Demand Schedule

A chart displaying the amounts of a product or service that buyers are ready and capable of purchasing at different price levels.

Relatively Inelastic

Describes a situation where the quantity demanded or supplied changes by a smaller percentage than the percentage change in price.