Response to post 1 and 2

There is some excellent information about the indirect and direct techniques of creating a statement of cash flow! Since the net income is calculated first, as you have noticed, indirect procedures have been thought to be simpler than direct ones (Bradbury, 2011). In doing so, it is included in non-cash expenses, facilitating analysis. It is important to note that because net income is automated, most firms choose to use indirect methods (Bradbury, 2011). Thank you for the thorough analysis of your post. The operating expense for the direct method is listed in the cash flow to include the cash to suppliers, income taxes, cash to customers, employees and associated interests (Lie Dharma Putra, 2011). For this reason, the method is cumbersome requiring through knowledge on the type of expenses. However, the indirect method is simpler for most calculations as only the identification of non-cash related income is required for the reconciliation of the cash flow as the net income is added back to non-cash expenses (Lie Dharma Putra, 2011). Would you expound on when it is appropriate to apply either of the methods?
Response to post 3
Am impressed by your post Traci; the use of a personal experience to explain the PPP theory actually fits the bill. Yes, when the output of a country is lower while the money supply is high, it leads to inflation (Meier, 2010). As the theory purports, inflation will eventually affect a country's currency leading to lower prices against other currencies. Indeed, your house was more valuable at its selling time as the value of the dollar was double that of the pound which was a good bargain and only explains the effect of inflation according to the purchasing power parity theory.
Response to post 4
Great post Consuelo! You have used the example given by Hill (2015) on Bolivia that occurred due to hyperinflation. Inflation especially caused by decreased output in the country leads to depreciation of the currency (Alba & Papell, 2007). This affects the currency exchange giving other currencies an advantage over the dollar. In such a situation, exchanging foreign currency becomes rather profitable which is injurious to the economy.















References
Alba, J. D., & Papell, D. H. (2007). Purchasing power parity and country characteristics: Evidence from panel data tests. Journal of Development Economics, 83(1), 240-251. http://doi.org/10.1016/j.jdeveco.2005.09.006
Bradbury, M. (2011). Direct or Indirect Cash Flow Statements? Australian Accounting Review, 21(2), 124-130. http://doi.org/10.1111/j.1835-2561.2011.00130.x
Lie Dharma Putra. (2011). Cash {Flows}: {Operating} {Activities} {Direct} {Vs} {Indirect} {Method}. Accounting, Financial, Tax.
Meier, A. (2010). Still Minding the Gap: Inflation Dynamics During Episodes of Persistent Large Output Gaps. IMF Working Papers, 10, 1. http://doi.org/10.5089/9781455202232.001