The direct method of Statement of Cash Flows preparation is
A) widely used in practice.
B) preferred by standard setters.
C) easier to read and interpret than the indirect method.
D) inconsistent and provided different operating results.

Question

Quizplus · Accepted Answer

The direct method of Statement of Cash Flows preparation is not widely used in practice because it requires detailed tracking of cash inflows and outflows. It is not necessarily preferred by standard setters either. The indirect method is actually easier to read and interpret for most users. Additionally, the direct method may result in inconsistent and different operating results due to the different ways in which companies identify and classify cash flows. However, the direct method is more transparent and provides more detailed information about a company's cash movements.

The Direct Method of Statement of Cash Flows Preparation Is