In a Statement of Cash Flows Prepared by the Indirect

question 37

Multiple Choice

In a statement of cash flows prepared by the indirect method, an increase in accounts receivable should be

• A)deducted from net income in the operating activities section
• B)added to net income in the operating activities section
• C)reported as an inflow in the investing activities section
• D)reported as an inflow in the financing activities section

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Definitions:

Comparative Advantage

A principle that states that a party should specialize in producing goods for which it has the lowest opportunity cost, leading to increased economic efficiency.

Opportunity Cost

The sacrifice of potential gains from other possibilities when a specific alternative is opted for.

Absolute Advantage

A condition in which a country, individual, or firm can produce a good or service at a lower cost per unit than competitors.

Specialization

Focusing on a narrow area of expertise or production, often leading to increased efficiency and productivity in that area.