Assume the Indirect Method Is Used to Compute Net Cash

question 104

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 Income Taxes Payable-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:

Sales Commissions

Financial compensation awarded to sales personnel for meeting or exceeding sales targets, often a percentage of the sales they generate.

Materials

The physical substances or components needed to create a product or to carry out a service or process.

Price Inelastic

Describes a situation where the demand for a product or service is relatively unaffected by changes in its price.

Personal Computers

Electronic devices designed for individual use, capable of performing a wide range of tasks such as word processing, internet browsing, and gaming.