medium · Principles of Finance

Why does the 'Indirect Method' of cash flow start with Net Income and then add back the increase in Accounts Payable?

1. Because the company has already paid the cash but hasn't recorded the expense yet.
2. Because Accounts Payable is a form of revenue for the company.
3. Because Net Income was reduced by an expense that didn't involve a cash payment.
4. Because the company expects to receive a cash gift from its suppliers.

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