The Indirect Method of Preparing a Statement of Cash Flows

question 72

Multiple Choice

The indirect method of preparing a statement of cash flows

• A)eliminates the need for a schedule of noncash investing and financing transactions.
• B)provides a different result than the direct method.
• C)adjusts net income for changes in current accounts.
• D)shows collections from customers rather than the change in Accounts Receivable.

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Definitions:

Involuntary Bankruptcy

A legal process initiated by creditors to force a debtor into bankruptcy proceedings, in order to recoup debts owed by liquidating the debtor's assets.

Nonprofit Organizations

Organizations that operate for charitable, educational, cultural, scientific, or social welfare purposes rather than for profit.

Means Test

An analysis conducted to determine an individual's financial eligibility for certain government assistance programs, based on income and assets.

Current Income

Current Income signifies the revenue or income generated from investments or employment within a specified current period, typically considered for personal or business financial analysis.