When a company uses the direct method to determine the net cash flow from operating activities,cash flows from operating activities will:
A)be identical to the amount reported using the indirect method.
B)be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
C)always be larger than the amount reported using the indirect method.
D)be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect method.

Question

Quizplus · Accepted Answer

When a company uses the direct method to determine the net cash flow from operating activities, the cash flows from operating activities will be identical to the amount reported using the indirect method. The only difference is that the direct method presents this information in a more detailed and straightforward way by breaking down the inflows and outflows of cash related to operating activities.

When a Company Uses the Direct Method to Determine the Net