The Direct Method for Computing and Reporting Net Cash Flows

question 131

True/False

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

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Definitions:

Net Present Value

A valuation method that calculates the difference between the present value of cash inflows and outflows over a period, used to assess the profitability of an investment.

Accounts Receivable Approach

A method for estimating uncollectible accounts based on outstanding receivables, which can impact a company’s financial analysis and credit management policies.

Monthly Interest Rate

The interest rate for a particular period of one month, often used to calculate the interest due on a loan or mortgage.

Variable Cost

Expenses that vary directly with the level of production or sales volume, such as materials and labor.