Which of the Following Would Be Subtracted from Net Income

question 5

Multiple Choice

Which of the following would be subtracted from net income when using the indirect method to derive net cash flows from operating activities?

• A) Decrease in net accounts receivable
• B) Loss on sale of investments
• C) Decrease in salaries and wages payable
• D) Depreciation expense

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Definitions:

Compensating Balance

A minimum cash balance required by some banks to be maintained in a bank account.

Maximum Cash Balance

The highest amount of cash that a company aims to hold at any given time.

Internal Control

Protocols and processes designed by a business to secure the authenticity of its financial and accounting information, enhance accountability, and impede fraudulent operations.

Control Environment

The set of standards, processes, and structures that provide the foundation for carrying out internal control across the organization.