The Direct Method of Preparing a Statement of Cash Flows

question 31

Multiple Choice

The direct method of preparing a statement of cash flows

• A)is the overwhelming choice of most companies.
• B)begins with net income in the operating activities section.
• C)will produce the same net figure as the indirect method.
• D)All of these choices.

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Definitions:

Income Effect

How an individual's or economic income shift influences the demand for goods or services.

Substitution Effect

The substitution effect describes the change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.

Higher Wage

The increased remuneration or salary received by an employee, often as a result of promotions, market adjustments, or successful salary negotiations.

Labor for Leisure

The trade-off between working hours for income and spending time on relaxation or enjoyment activities.