When Preparing the Operating Activities Section of the Statement of Cash

question 60

True/False

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are added to net income.

---

Definitions:

Explicit Cost

Direct, out-of-pocket payments for resources employed in the production of goods or services.

Marginal Cost

The additional cost incurred by producing and selling one more unit.

Fixed-Cost Fallacy

Consideration of costs that do not vary with the consequences of your decision (also known as the sunk-cost fallacy).

Depreciation Costs

The allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear and tear, age, or obsolescence.