Under the Direct Method of Preparing the Statement of Cash

question 106

Multiple Choice

Under the direct method of preparing the statement of cash flows,cash receipts from operating activities do NOT include:

• A)collection of long-term note receivable.
• B)collections from customers.
• C)receipt of interest on investments.
• D)receipt of dividends on investments.

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Definitions:

Excess Capacity

The amount by which the actual production capabilities of a company exceed the current demand for its products or services.

Special Order

A one-time order that is not part of the company's usual ongoing operations, often requiring special pricing or terms.

Incremental Revenues

Additional income generated from a new action or decision, above and beyond the existing baseline revenue.

Incremental Analysis

The method of evaluating the financial impact of business decisions by considering only the costs and benefits that change due to the decision.