Companies can construct the statement of cash flows using either the direct method or the indirect method.

Question

Quizplus · Accepted Answer

This statement is true. Companies have the option to use either the direct method or the indirect method to construct the statement of cash flows. The direct method shows the actual cash inflows and outflows, while the indirect method starts with net income and adjusts for non-cash items and changes in working capital to arrive at the net cash provided by operating activities.

Companies Can Construct the Statement of Cash Flows Using Either