While the Indirect Method Is Prevalent in the Construction of Cash

question 17

Multiple Choice

While the indirect method is prevalent in the construction of cash flow statements in the U.S., why might a firm choose to construct its cash flow statement using the direct method?

• A)The direct method will always show a higher net change in cash.
• B)The direct method is usually easier for users to understand.
• C)The direct method is required by some industries.
• D)The direct method will always make the firm's management look better.
• E)None of the above answer choices is correct.

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Definitions:

Selective Optimization

A strategy focusing on maximizing performance in some areas through the selection and optimization of resources, while minimizing losses in other areas.

Compensation

A concept that refers to making up for a deficiency in one area by excelling in another, or a payment made to someone for loss or suffering.

Healthy Approach

A method or strategy focused on promoting well-being and preventing diseases, involving balanced nutrition, regular physical activity, and mental health care.

Sexuality

Pertains to how individuals experience and express themselves as sexual beings, encompassing sexual orientation, desires, practices, and identity.