A Major Disadvantage of the Indirect Method of Reporting Cash

question 176

True/False

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

Recognize the importance and methodology of setting SMART goals for personal and professional development.

Distinguish between terminal and instrumental values and their roles in ethical decision-making.

Grasp the significance of ethical audits, ethics tests, and ethical decision-making frameworks in guiding ethical behavior.

Analyze the stages of moral development according to Kohlberg and their implications for managerial behavior and ethical reasoning.

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Definitions:

Operating Leverage

The degree to which a company uses fixed operating costs, affecting its earnings before interest and taxes (EBIT) with changes in sales.

Breakeven Point

The financial position at which total costs equal total revenues, indicating that there is no net loss or gain.

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, insurance, and salaries.

Revenue Line

Represents the income that a company generates from its normal business operations, typically shown at the top of an income statement.