With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?
A) Indirect method because it provides better information for decision making
B) Direct method because it is based on the accrual basis of accounting
C) Direct method because it requires a supplemental indirect method section
D) Indirect method because it is less expensive to prepare

Question

Quizplus · Accepted Answer

Most companies use the indirect method because it is less expensive to prepare, as it adjusts net income for changes in balance sheet accounts to convert it from an accrual basis to a cash basis.

With Reference to the Reporting of Net Cash Flow from Operating