While preparing a statement of cash flows using the indirect method, an increase in current assets is added to net income to arrive at net cash provided by operating activities. True False

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Business

Deandre Riley

11 May, 18:47

While preparing a statement of cash flows using the indirect method, an increase in current assets is added to net income to arrive at net cash provided by operating activities. True False

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Evan Lam · Answer 1

Answer: False.

Explanation:

The statement is false because we know that an increase in the current assets will be deducted from the net income to arrive at the net cash flow. It is because of the outflow of cash.

Whereas, on the other hand, a decrease in the current assets means that there is an inflow of cash, therefore, this will be added to the net income to arrive at the net cash flow by operating activities.