In the operating activities section of the statement of cash flows, we start with net income:
A) in the direct method.
B) in the indirect method.
C) in both the direct and the indirect methods.
D) in neither the direct nor the indirect methods.

Question

Quizplus · Accepted Answer

The indirect method starts with net income and adjusts for non-cash items and changes in working capital to arrive at cash flows from operating activities. The direct method directly lists all cash inflows and outflows from operating activities.

In the Operating Activities Section of the Statement of Cash