Most businesses prefer to use the indirect method of formatting a cash flow statement.

Question

Quizplus · Accepted Answer

The indirect method of formatting a cash flow statement is the most commonly used method by businesses. It involves adjusting net income for non-cash items and changes in working capital to arrive at the cash flow from operating activities. The direct method, on the other hand, involves reporting actual cash inflows and outflows from operating activities. However, the direct method is less commonly used as it requires more detailed information and can be more time-consuming to prepare.

Most Businesses Prefer to Use the Indirect Method of Formatting