Question

Which one of the following below should be added to net income in calculating net cash flow from operating activities using the indirect method?

a. A decrease in accounts payable

b. Dividends paid on common stock

c. An increase in accrued liabilities

d. A gain on the sale of land

Answer 1

Which one of the following below should be added to net income in calculating net cash flow from operating activities using the indirect method?

Answer: C = An increase in accrued liabilities.

TIP: While calculating CFO from the indirect method, we always add expenses and losses to the net income and subtract income and gains from the net income.