Final answer:
The four sections in the direct method cash flow statement are Operating Activities, Investing Activities, Financing Activities, and Supplementary Information. These sections collectively account for all the cash transactions related to the company's operations, investments, financing, and additional details necessary for a comprehensive cash flow understanding. The correct option is D) Operating Activities, Investing Activities, Financing Activities, Supplementary Information.
Step-by-step explanation:
The four major sections in the direct method cash flow statement are Operating Activities, Investing Activities, Financing Activities, and Supplementary Information. In the Operating Activities section, businesses report cash transactions related to their primary operations, such as cash receipts from customers and cash payments to suppliers and employees.
Investing Activities record transactions involving the purchase and sale of long-term assets and investments not included in cash equivalents, like sales or purchase of property, plant, equipment, or securities. Financing Activities detail the inflows and outflows of cash related to external funding and returning capital to shareholders, for example issuing shares or bonds, and paying dividends. Lastly, Supplementary Information often includes the amount of interest and income taxes paid, as these are elements that complement the understanding of a company's cash flow situation.
These categories provide a comprehensive view of a company's cash transactions, illustrating its financial strength and ability to sustain operations, fund investments, and manage its financial structure. Throughout these sections, the focus is on actual cash transactions, distinguishing the direct method from the indirect method, which begins with net income and adjusts for non-cash transactions.
The correct option for the question is D) Operating Activities, Investing Activities, Financing Activities, Supplementary Information.