Question

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to_______ ___________to prepare the operating section for the indirect format of the statement of cash flows.

Answer 1

Answer:

Net income/earnings

Explanation:

Cashflow statements are usually presented in the direct or indirect format.

The net cash flow from operating activities is done with an adjustment to the net income considering non-cash items such as depreciation, non-operating items and changes in current assets and liabilities such as changes to inventory, changes in accounts payable and receivables etc.

The net of all these elements and the net income/earnings is known as the net cashflows from operating activities in the indirect format of the statement of cash flows.