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.

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Definitions:

Processing Delay

The time taken between the initiation and completion of a process, often referring to the time before a transaction or operation is executed.

BAT Model

A bargaining tool or theory used in negotiation that stands for the Best Alternative To a negotiated agreement.

Marketable Securities

Financial instruments that can be quickly converted into cash at a reasonable price.

Ledger Balance

The total balance of funds in an account at the beginning of each day, including all deposits and withdrawals that were posted from the previous night.