Assume the Indirect Method Is Used to Compute Net Cash

question 11

Multiple Choice

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Inventory-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

• A) Add to net income to arrive at net cash flows from operating activities
• B) Subtract from net income to arrive at net cash flows from operating activities
• C) Not used to adjust net income to calculate net cash flows from operating activities

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Definitions:

Principal Value

The original sum of money invested or loaned, before interest or any profit earned.

Note Receivable

An asset on the balance sheet representing money owed to the holder by a debtor, which includes an obligation to pay both the principal and interest.

Dishonoured

Refers to a financial instrument, such as a check or a bill, that is not paid upon presentation for settlement.

Maturity Value

The amount that will be received at the maturity date of an investment, including the principal and any accrued interest.