Which of the Following Should Be Deducted from Net Income

question 177

Multiple Choice

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

• A) a decrease in inventory
• B) a decrease in accounts payable
• C) preferred dividends declared and paid
• D) a decrease in accounts receivable

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Definitions:

Average Daily Float

The average amount of uncollected funds represented by checks in the process of clearing.

Collection Delay

The time lag between when a sale is made or service rendered and when the payment is actually received.

Cash Balance

The amount of cash a company has on hand at any given time, which includes currency, coins, and balances in checking and savings accounts.

Market Rate of Return

The average return that investors expect to earn from a particular investment, based on historical or anticipated performance.