Assume the Indirect Method Is Used to Compute Net Cash

question 117

Multiple Choice

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Interest Income (assume that cash received is equal to amount reported) -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:

Reasonable Decision

A choice made after careful consideration of facts and logical reasoning, often seen as sensible or practical.

Problem Recognition

The initial step in the decision-making process where individuals realize the difference between their current state and a desired state.

Satisficing Solution

A decision-making strategy that aims for a solution that is good enough, rather than optimal, based on the available information and resources.

Herbert Simon

An economist, political scientist, and cognitive psychologist who made significant contributions to the fields of artificial intelligence, economics, and cognitive psychology, and who was awarded the Nobel Prize in Economics in 1978.