Highlight your answers.

1. The indirect method is used to develop Which section of the cash flow statement?

a.

Operating

b.

Investing

c.

Financing

d.

All of them.

2. How is "depreciation expense" treated in developing cash flow statement using the indirect method?

a. Add to net income in calculating cash flow from operating activities

b. Subtracted from net income in calculating cash flow from operating activities

c. It is part of investing activities as it is related to PPE

d. It is not considered as it is not a cash activity

3. How is "increase in inventory" treated in developing cash flow statement using the indirect method?

a. Add to net income in calculating cash flow from operating activities

b. Subtracted from net income in calculating cash flow from operating activities

c. It depends

d. It is part of investing activities

4. How is "loss in selling machinery" treated in developing cash flow statement using the indirect method?

a. Add to net income in calculating cash flow from operating activities

b. Subtracted from net income in calculating cash flow from operating activities

c. It is part of investing activities as it is related to PPE

d. we need to know the selling price of the machinery to decide.

5. How is "decrease in investment" treated in developing cash flow statement using the indirect method?

a. Add to net income in calculating cash flow from operating activities

b. Subtracted from net income in calculating cash flow from operating activities

c. It is part of investing activities

d. It depends on whether it's long-term or short-term investment.