Which of the following is not true of the direct method of preparing a statement of cash flows?
A) It has a different net cash inflow (outflow) from operating activities than the indirect method.
B) It reports the same net increase or decrease in cash as the indirect method.
C) It gives the user a sense of the magnitude of gross dollars flowing in and out of the company.
D) It has the same cash flows from investing and financing activities as the indirect method.

Question

Quizplus · Accepted Answer

The direct method provides a different calculation of net cash inflow (outflow) from operating activities compared to the indirect method. Both methods report the same net increase or decrease in cash and have the same cash flows from investing and financing activities. The direct method provides the user with a more detailed breakdown of cash inflows and outflows, giving a sense of the magnitude of gross cash flows.

Which of the Following Is Not True of the Direct