In preparing the operating activities section of the statement of cash flows, most companies in Canada prefer to

A) use the direct method.
B) use the indirect method.
C) present both the indirect and direct methods in their financial reports.
D) prepare the operating activities section on the accrual basis.

Operating Activities

Day-to-day actions that are involved in running a company, such as selling products, managing expenses, and paying employees, which are reflected in the cash flow statement.

Direct Method

A cash flow statement preparation approach that lists major categories of gross cash receipts and payments, offering a more straightforward view of a company’s cash flow from operational activities.

Indirect Method

A way to report cash flows from operating activities by starting with net income and adjusting for non-cash transactions.