Cash generated from operating activities may be computed by using:
A)the indirect method.
B)the direct method.
C)either the direct or indirect method.
D)the combination method.

Question

Quizplus · Accepted Answer

Cash generated from operating activities can be computed using either the direct or indirect method. Both methods are accepted under accounting standards, but they approach the calculation in different ways. The direct method lists all cash receipts and payments, while the indirect method starts with net income and adjusts for non-cash transactions and changes in working capital.

Cash Generated from Operating Activities May Be Computed by Using