Assume the Indirect Method Is Used to Compute Net Cash

question 14

Multiple Choice

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Accounts Receivable-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:

Plant Assets

These are long-term tangible assets that are used in the production of goods and services and are expected to provide benefits for more than one year.

Income Statement

A financial statement that reports a company's financial performance over a specific period, displaying revenue, expenses, and net income.

Additions and Improvements

Capital expenditures made to increase the value of existing assets, often leading to a longer useful life or increased functionality.

Operating Efficiency

A measure of a company's ability to minimize costs and maximize output during its operations.