When the Direct Method Is Used to Determine the Net

question 50

Multiple Choice

When the direct method is used to determine the net cash flow from operating activities,other operating expenses are converted into cash outflows for payments to suppliers of services by:

• A)adding changes in prepaid expenses and accrued liabilities to other expenses.
• B)subtracting increases in prepaid expenses and decreases in accrued liabilities from other expenses.
• C)adding increases in prepaid expenses and decreases in accrued liabilities to other expenses.
• D)subtracting changes in prepaid expenses and accrued liabilities from other expenses.

---

Definitions:

Few Firms

A market situation typically characterized by an oligopoly, where a small number of companies possess the majority of market share.

Tacit Collusion

An unwritten, unspoken understanding among competitors to set prices or production levels to avoid direct competition.

Formal Agreement

A legally binding contract or arrangement between two or more parties, often documented and enforceable by law.

Duopolists

Firms or entities within an oligopoly that specifically consist of only two producers or sellers in the market.