Corporations Do Not Commonly Use the Direct Method for the Statement

question 57

Multiple Choice

Corporations do not commonly use the direct method for the Statement of Cash Flows because

• A) they do not have easy access to the necessary information.
• B) FASB prefers the indirect method.
• C) the direct method does not follow GAAP.
• D) there are fewer disclosures required under the indirect method.

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Definitions:

Optimal Strategy

The best course of action, developed through planning and analysis, to achieve maximum effectiveness or profitability.

Expected Cost

The forecasted amount of expenses anticipated to be incurred for a specific activity or project, often used in budgeting and planning.

Operating Costs

Expenses incurred from the day-to-day functioning of a business, excluding costs associated with production.

Cross-Dock Facility

A logistics procedure where products received at a warehouse or distribution center are directly transferred from inbound to outbound shipping with minimal to no storage time.