The Indirect Method of Preparing a Statement of Cash Flows

question 86

Short Answer

The indirect method of preparing a statement of cash flows begins with net income and then adjusts it for noncash items to produce net cash flow from ____________________.

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Definitions:

Financial Asset

A financial asset refers to any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset from another entity.

Transactions Exposure

The potential for a company's cash flows to be affected by changes in exchange rates due to transactions in foreign currencies.

Financial Risk

Financial risk involves the possibility that a company's cash flow will not be sufficient to meet its obligations, which can result from volatility in the markets, business operations, or creditworthiness.

Commodity Swap

A financial agreement where two parties exchange cash flows related to a specific commodity's price.