Which of the following items would be subtracted from Net Income to compute Net Cash Flow from Operating Activities under the indirect method?
A) A decrease in Prepaid Insurance
B) A decrease in Merchandise Inventory
C) An increase in Salaries Payable
D) A decrease in Accounts Payable

Question

Quizplus · Accepted Answer

Under the indirect method for computing Net Cash Flow from Operating Activities, increases in current liabilities are added to net income, and decreases in current liabilities are subtracted. A decrease in Accounts Payable means the company has paid off some of its liabilities, which is a use of cash, hence it is subtracted from Net Income.

Which of the Following Items Would Be Subtracted from Net