Question

In order to determine net cash provided by operating activities, a company must convert net income from an accrual basis to a cash basis under -
A-the direct method only.
B-the indirect method only.
C-both the direct method and the indirect method.
D-neither the direct nor the indirect method.

Answer 1

Answer:

C-both the direct method and the indirect method.

Explanation:

When you want to calculate net cash flows from operating activities, you only consider cash inflows and outflows. This means that changes in accounts receivable, inventories and other prepaid expenses must be adjusted, as well as accounts payable and any other non-cash expenses like depreciation or amortizations.