Which of the Following Should Be Added to Net Income

question 42

Multiple Choice

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

• A) depreciation expense
• B) an increase in inventory
• C) a gain on the sale of equipment
• D) dividends declared and paid

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Definitions:

Cash Discount

A reduction in invoice amount offered by sellers to encourage early payment by buyers.

Incremental Investment

Additional funds invested in a project to generate more returns.

Receivables

Money owed to a company by its customers for goods or services that have been delivered or sold but not yet paid for.

Accounts Receivable Approach

A method used by businesses to estimate the amount of credit sales that are not likely to be collected.