The Direct Method of Preparing a Statement of Cash Flows

question 105

Multiple Choice

The direct method of preparing a statement of cash flows

• A) is the overwhelming choice of most companies.
• B) begins with net income in the operating activities section.
• C) is more difficult to understand than the indirect method for the average reader.
• D) will produce the same net figure as the indirect method.

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Definitions:

Primary Market Transactions

Deals that occur in the primary market, where new securities are issued and sold by companies or governments directly to investors, raising capital.

Stock Exchanges

Marketplaces where securities, such as stocks and bonds, are bought and sold by investors.

Issuing Companies

Companies or entities that offer securities, such as stocks or bonds, to the public for the purpose of raising capital.

Venture Capital Investors

Individuals or firms that provide funding to start-up companies or small businesses with long-term growth potential.