Which of the Following Observations Concerning the Comparisons Between the Direct

question 13

Multiple Choice

Which of the following observations concerning the comparisons between the direct and indirect approaches of presenting a cash flow statement is true?

• A) The final number of cash flows from operating activities is different under the two approaches.
• B) The direct approach provides a clearer picture of cash flows related to operations.
• C) Authoritative bodies have generally expressed a preference for the indirect method.
• D) A separate reconciliation of operating cash flows and net income is required under the indirect approach.

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Definitions:

Compounded Monthly

A method of calculating interest where the earned interest is added to the principal balance at the end of each month, so that the interest for the next month is calculated on a higher balance.

Quarterly

Pertaining to a three-month period or occurring every three months, often used in the context of financial reporting and dividend payments.

Compounded Quarterly

The process of calculating interest and adding it to the account balance four times a year, resulting in exponential growth.