The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that:
A) the indirect method starts with net earnings and adds back all the expenses relating to operating activities.
B) the indirect method calculates net earnings as the difference between net assets and net liabilities.
C) the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.
D) the indirect method adjusts net earnings for contra account balances.

Question

Quizplus · Accepted Answer

The indirect method adjusts net earnings for items that affected reported net earnings but did not affect cash, such as depreciation expense, changes in working capital, and non-cash items.

The Indirect Method Starts with Net Earnings and Converts Them