A Company Uses the Direct Method to Prepare the Statement

question 97

Multiple Choice

A company uses the direct method to prepare the statement of cash flows.How will the amount of cash payments to suppliers be computed?

• A)The amount of cash payments to suppliers is computed as interest expense minus the decrease in accounts payable.
• B)The amount of cash payments to suppliers is computed as purchases minus the increase in accounts payable.
• C)The amount of cash payments to suppliers is computed as interest expense minus the decrease in merchandise inventory.
• D)The amount of cash payments to suppliers is computed as interest expense minus the increase in merchandise inventory.

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Definitions:

Marginal Revenue

The boost in revenue achieved by selling one more unit of a good or service.

Demand Curve

A graph demonstrating the relationship between the price of a good or service and the quantity demanded for it at those prices, typically showing a downward slope from left to right.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing and able to purchase at different price levels.

Marginal Cost

The elevation in full costs that come from generating an additional unit of a good or service.