Asked by LaQuesha Jewell on May 07, 2024
Verified
A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.
Indirect Method
A cash flow statement approach that adjusts net income for changes in non-cash accounts to calculate cash from operating activities.
Operating Activities
Activities directly related to the operation of the business, including cash flows from operations, investing, and financial activities.
- Distinguish between direct and indirect approaches in the reporting of operating activities cash flows.
Verified Answer
LA
Lizbeth Alondra GomezMay 09, 2024
Final Answer :
False
Explanation :
The indirect method starts with net income and adjusts for non-cash transactions and changes in working capital, thus it does not emphasize the difference between cash flows from operating activities and net income but rather reconciles the two.
Learning Objectives
- Distinguish between direct and indirect approaches in the reporting of operating activities cash flows.