Question

What is the most commonly used method for calculating and reporting a company's net cash flow from operating activities?

a) Indirect method
b) Direct method
c) Accrual accounting
d) FIFO method

Answer 1

The most commonly used method for calculating and reporting a company's net cash flow from operating activities is the Indirect method.

Step-by-step explanation:

The most commonly used method for calculating and reporting a company's net cash flow from operating activities is the Indirect method. This method starts with the net income of the company and adjusts it for non-cash transactions, changes in working capital, and other adjustments to arrive at the net cash provided by operating activities.

For example, if a company had a net income of $100,000 and had an increase in accounts receivable of $20,000 during the period, the Indirect method would deduct $20,000 from the net income to reflect the fact that the increase in accounts receivable did not result in actual cash received.