Assume the Direct Method Is Used to Compute Net Cash

question 23

Multiple Choice

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on cash payments for operating expenses by choosing one of the following:

• A)Add to operating expenses to arrive at cash payments for operating expenses.
• B)Subtract from operating expenses to arrive at cash payments for operating expenses.
• C)Not used to adjust operating expenses to arrive ay cash payments for operating expenses.

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Definitions:

Price Effects

Refers to the impact of price changes on the consumer's choice and the quantity demanded of goods and services.

Quantity Effects

The changes in the amount of goods or services produced or consumed in response to changes in price or other factors.

Total Revenue

The overall financial income a company acquires from its commercial activities, including the sale of goods and provision of services, within a certain period.

Downward-Sloping

Refers to a curve or line that decreases in value as it moves from left to right, often used in economics to describe demand curves where quantity demanded decreases as the price increases.