Starting with profit and adjusting it for items that affected reported profit but not cash is called the
A)direct method.
B)indirect method.
C)working capital method.
D)cost-benefit method.

Question

Quizplus · Accepted Answer

The process described in the question is referring to the indirect method of calculating cash flow from operations. This method starts with reported profit and adjusts for non-cash items, such as depreciation and amortization, and changes in working capital accounts, such as accounts receivable and accounts payable. The other answer choices listed (direct method, working capital method, and cost-benefit method) do not relate to this specific process of adjusting profit for non-cash items.

Starting with Profit and Adjusting It for Items That Affected