In determining cash flows from operations, which method starts with net income, then add noncash expenses and subtracts noncash revenues?
A)direct method
B)fixed method
C)indirect method
D)funds flow method
E)variable method

Question

Quizplus · Accepted Answer

The indirect method starts with net income, then adds back noncash expenses (such as depreciation) and subtracts noncash revenues (such as gain on sale of assets) to arrive at cash flows from operations. The direct method, on the other hand, directly calculates cash inflows and outflows from operating activities without starting with net income. Fixed method, funds flow method, and variable method are not commonly used methods for calculating cash flows from operations.

In Determining Cash Flows from Operations, Which Method Starts with Net