Question 1

A cash inflow from financing activities includes:

Accepted Answer

A)  receipt of interest payments. 
B)  proceeds from selling equipment. 
C)  proceeds from issuance of bonds payable. 
D)  proceeds from selling investments in equity securities of another company. 
A)  receipt of interest payments. 
B)  proceeds from selling equipment. 
C)  proceeds from issuance of bonds payable. 
D)  proceeds from selling investments in equity securities of another company.

Question 2

Which statement is false regarding the preparation of the indirect method of the statement of cash flows?

Accepted Answer

A)  An increase in merchandise inventory is subtracted from net income. 
B)  Depreciation expense is added to net income. 
C)  An increase in accounts receivable is added to net income. 
D)  An increase in accounts payable is added to net income. 
A)  An increase in merchandise inventory is subtracted from net income. 
B)  Depreciation expense is added to net income. 
C)  An increase in accounts receivable is added to net income. 
D)  An increase in accounts payable is added to net income.

Question 3

Kraco Corporation reported 2010 net income of $450,000, including the effects of depreciation expense of $60,000, and amortization expense on a patent of $10,000. Also, cash of $50,000 was borrowed on a 5-year note payable. Based on this data, total cash inflow from operating activities using the indirect method for 2010 was

Accepted Answer

A)  $570,000 
B)  $520,000 
C)  $470,000 
D)  $440,000 
A)  $570,000 
B)  $520,000 
C)  $470,000 
D)  $440,000

Question 4

Which of the following is not one of the reasons why net income differs from cash flows from operations under the indirect method of calculating cash flows?

Accepted Answer

A)  non-cash items, such as depreciation and amortization 
B)  changes in working capital accounts 
C)  gains and losses related to the sale of plant, property and equipment 
D)  sale or repurchase of capital stock 
A)  non-cash items, such as depreciation and amortization 
B)  changes in working capital accounts 
C)  gains and losses related to the sale of plant, property and equipment 
D)  sale or repurchase of capital stock

Question 5

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because

Accepted Answer

A)  their cash flow from operations will be much greater than their working capital from operations. 
B)  their cash flow from operations will not differ much from their working capital from operations. 
C)  their cash flow from operations will be much less than their working capital from operations. 
D)  there will be no relation between their cash flow from operations and working capital from operations. 
A)  their cash flow from operations will be much greater than their working capital from operations. 
B)  their cash flow from operations will not differ much from their working capital from operations. 
C)  their cash flow from operations will be much less than their working capital from operations. 
D)  there will be no relation between their cash flow from operations and working capital from operations.

Question 6

One rationale for the statement of cash flows is to

Accepted Answer

A)  ensure that the cash account balances at year-end. 
B)  reconcile differences between net income and cash receipts and disbursements. 
C)  calculate the company's free cash flow. 
D)  examine the cash effects of income from discontinued operations, extraordinary items and changes in accounting principles. 
A)  ensure that the cash account balances at year-end. 
B)  reconcile differences between net income and cash receipts and disbursements. 
C)  calculate the company's free cash flow. 
D)  examine the cash effects of income from discontinued operations, extraordinary items and changes in accounting principles.

Question 7

Olive Corporation manufactures food processing equipment. Use Olive Corporation's two most recent balance sheets and most recent income statement to prepare a statement of cash flows for 2010. The company paid dividends of $6,250 during 2010.

Accepted Answer

The answer of Olive Corporation manufactures food processing equipment. Use...

Question 8

The payment of dividends would be classified as ____________________ activities in the statement of cash flows.

Accepted Answer

The answer of The payment of dividends would be classified...

Question 9

Krenzer, Inc., a financial company, reported income tax expense of $2,648 million for 2010, comprising $2,346 million of current taxes and $302 million of deferred taxes. The balance sheet showed income taxes payable of $222 million at the beginning of 2010 and $427 million at the end of 2010. Compute the amount of income taxes paid in cash during 2010.

Accepted Answer

Income Tax Payable at the Beginning of 2

Question 10

Which of the following is not an expense excluded when calculating EBITDA?

Accepted Answer

A)  depreciation expense 
B)  administrative expense 
C)  interest expense 
D)  tax expense 
A)  depreciation expense 
B)  administrative expense 
C)  interest expense 
D)  tax expense

Question 11

Clarion Industries manufactures computer equipment and provides financing for purchases by its customers. Clarion reported sales and interest revenues of $61,324 million for 2010. The
balance sheet showed current and noncurrent receivables of $25,752 million at the beginning
of 2010 and $28,448 million at the end of 2010. Compute the amount of cash collected
from customers during 2010.

Accepted Answer

(in $millions)
Sales and Inter

Question 12

For the following types of companies, discuss whether you think their cash flows from operations, investing, and financing will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answer.

Accepted Answer

The answer of For the following types of companies, discuss...

Question 13

Which of the following statements about the statement of cash flows is correct?

Accepted Answer

A)  A purchase of equipment is classified as a cash inflow from investing activities. 
B)  Cash dividends paid are classified as cash flows from operating activities. 
C)  Cash dividends received on stock investments are classified as cash flows from operating activities. 
D)  A company with a net loss on the income statement will always have a net cash outflow from operating activities. 
A)  A purchase of equipment is classified as a cash inflow from investing activities. 
B)  Cash dividends paid are classified as cash flows from operating activities. 
C)  Cash dividends received on stock investments are classified as cash flows from operating activities. 
D)  A company with a net loss on the income statement will always have a net cash outflow from operating activities.

Question 14

The receipt of dividends from an investee would be classified as ____________________ activities in the statement of cash flows.

Accepted Answer

The answer of The receipt of dividends from an investee...

Question 15

Academic research has found that market rates of return on common stock are the most highly correlated with

Accepted Answer

A)  net income. 
B)  cash flow from operations. 
C)  EBITDA. 
D)  cash flow from investing activities. 
A)  net income. 
B)  cash flow from operations. 
C)  EBITDA. 
D)  cash flow from investing activities.

Question 16

____________________ activities relate to the acquisition and sale of noncurrent assets, particularly property, plant and equipment.

Accepted Answer

The answer of ____________________ activities relate to the acquisition and...

Question 17

EBITDA not only ignores four expenses but also ignores changes in __________________________________________________ accounts.

Accepted Answer

operating

Question 18

Normally, cash flows from financing will start using cash during which phase of the product life cycle?

Accepted Answer

A)  Introduction 
B)  Growth 
C)  Maturity 
D)  Decline 
A)  Introduction 
B)  Growth 
C)  Maturity 
D)  Decline

Question 19

Adophus, Inc.'s 2010 income statement reported total revenues of $850,000 and total expenses (including $40,000 depreciation) of $720,000. The 2010 balance sheet reported the following: accounts receivable beginning balance of $50,000 and ending balance of $40,000; accounts payable beginning balance of $22,000 and ending balance of $28,000. Therefore, based only on this information and using the indirect method, the 2010 net cash inflow from operating activities was

Accepted Answer

A)  $126,000 
B)  $186,000 
C)  $166,000 
D)  $174,000 
A)  $126,000 
B)  $186,000 
C)  $166,000 
D)  $174,000

Question 20

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method?

Accepted Answer

A)  Subtract depreciation expense 
B)  add depreciation expense 
C)  add an increase in accounts receivable 
D)  add a decrease in accounts payable 
A)  Subtract depreciation expense 
B)  add depreciation expense 
C)  add an increase in accounts receivable 
D)  add a decrease in accounts payable

A cash inflow from financing activities includes:

Which statement is false regarding the preparation of the indirect method of the statement of cash flows?

Which of the following is not one of the reasons why net income differs from cash flows from operations under the indirect method of calculating cash flows?

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because

One rationale for the statement of cash flows is to

Olive Corporation manufactures food processing equipment. Use Olive Corporation's two most recent balance sheets and most recent income statement to prepare a statement of cash flows for 2010. The company paid dividends of $6,250 during 2010.

The payment of dividends would be classified as ____________________ activities in the statement of cash flows.

Which of the following is not an expense excluded when calculating EBITDA?

For the following types of companies, discuss whether you think their cash flows from operations, investing, and financing will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answer.

Which of the following statements about the statement of cash flows is correct?

The receipt of dividends from an investee would be classified as ____________________ activities in the statement of cash flows.

Academic research has found that market rates of return on common stock are the most highly correlated with

____________________ activities relate to the acquisition and sale of noncurrent assets, particularly property, plant and equipment.

EBITDA not only ignores four expenses but also ignores changes in __________________________________________________ accounts.

Normally, cash flows from financing will start using cash during which phase of the product life cycle?

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method?

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

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Exam 3: Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

A cash inflow from financing activities includes:

Which statement is false regarding the preparation of the indirect method of the statement of cash flows?

Which of the following is not one of the reasons why net income differs from cash flows from operations under the indirect method of calculating cash flows?

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because

One rationale for the statement of cash flows is to

Olive Corporation manufactures food processing equipment. Use Olive Corporation's two most recent balance sheets and most recent income statement to prepare a statement of cash flows for 2010. The company paid dividends of $6,250 during 2010.

The payment of dividends would be classified as ____________________ activities in the statement of cash flows.

Which of the following is not an expense excluded when calculating EBITDA?

For the following types of companies, discuss whether you think their cash flows from operations, investing, and financing will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answer.

Which of the following statements about the statement of cash flows is correct?

The receipt of dividends from an investee would be classified as ____________________ activities in the statement of cash flows.

Academic research has found that market rates of return on common stock are the most highly correlated with

____________________ activities relate to the acquisition and sale of noncurrent assets, particularly property, plant and equipment.

EBITDA not only ignores four expenses but also ignores changes in __________________________________________________ accounts.

Normally, cash flows from financing will start using cash during which phase of the product life cycle?

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method?

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters