The Direct Method of Preparing the Statement of Cash Flows

question 102

Multiple Choice

The direct method of preparing the statement of cash flows:

• A)has an identical operating activities section as the indirect method.
• B)is used by a vast majority of companies.
• C)is preferred by FASB.
• D)is much easier for companies to compute.

---

Definitions:

Total Interest Earned

The cumulative amount of interest received from an investment over a particular period.

Original Investment

The initial amount of money put into an investment or project, serving as the baseline for measuring future earnings or losses.

Nominal Interest Rate

The interest rate before adjustments for inflation, as opposed to the real interest rate.

Periodic Interest Rate

The interest rate applied to a loan or investment for a specific period, usually shorter than a year.