A statement of cash flows prepared under the DIRECT method starts with
A) net income.
B) gross profit.
C) cash received from customers.
D) income from operations.

Question

Quizplus · Accepted Answer

The direct method of preparing a statement of cash flows starts with cash received from customers, which is the primary source of cash inflows for most businesses. The other options, net income, gross profit, and income from operations, are all accounting measures used to calculate profitability, but they do not necessarily represent cash inflows or outflows.

A Statement of Cash Flows Prepared Under the DIRECT Method