If the calculation of net cash flows from operating activities starts with net income,the company:
A)is using the net income method.
B)will then remove all noncash items included in the calculation of net income.
C)is using the direct method.
D)will then add all additional noncash items not included in the calculation of net income.

Question

Quizplus · Accepted Answer

If the calculation of net cash flows from operating activities starts with net income, the company is using the indirect method. The first step in this method is to remove all noncash items (such as depreciation and amortization) included in the calculation of net income in order to arrive at net cash flows from operating activities.

If the Calculation of Net Cash Flows from Operating Activities