Reading 34: Understanding the Cash Flow Statement - LOS d, following, white, style, black, class

mayanfang1

Q1. Consider the following:

Argument #1: The indirect method presents a firm’s operating cash receipts and payments and is thus more consistent with the objectives of the cash flow statement.

Argument #2: The indirect method provides more information than the direct method and is more useful to analysts in estimating future operating cash flows.

Which of these arguments support the use of the indirect method for presenting cash flow from operating activities in the cash flow statement?

A)   Argument #2 only.

B)   Neither argument.

C)   Argument #1 only.

mayanfang1

答案和详解如下：

Q1. Consider the following:

Argument #1: The indirect method presents a firm’s operating cash receipts and payments and is thus more consistent with the objectives of the cash flow statement.

Argument #2: The indirect method provides more information than the direct method and is more useful to analysts in estimating future operating cash flows.

Which of these arguments support the use of the indirect method for presenting cash flow from operating activities in the cash flow statement?

A)   Argument #2 only.

B)   Neither argument.

C)   Argument #1 only.

Correct answer is B)

It is the direct method, not the indirect method, that presents operating cash receipts and payments and is thus more consistent with the objectives of the cash flow statement. The direct method provides more information than the indirect method and is preferred by analysts who are estimating future cash flows.

goofey

thanks

ff1980

thanks

mcdullpong

 thanks

wxvivian

 t

sorrybabyfish

thx

cq200564

1

saint_zhu

focus

sallmanns

f