Question 1

The following item would be classified as an operating activity on the statement of cash flows:

Accepted Answer

A) Payments for inventory. 
B) Acquisitions of equipment. 
C) Proceeds from borrowing. 
D) Payments on loans. 
A) Payments for inventory. 
B) Acquisitions of equipment. 
C) Proceeds from borrowing. 
D) Payments on loans. A

Question 2

What are the three areas of a cash flow statement that an analyst should cover at a minimum? Discuss each area by explaining items an analyst should be concerned with when reviewing the cash flow statement.

Accepted Answer

An analysis of the statement of cash flows should, at a minimum, cover the analysis of cash flow from operating activities, analysis of cash inflows and analysis of cash outflows.When analyzing the cash flow from operating activities, the analyst should be concerned with the success or failure of the firm in generating cash from operations, the underlying causes of the positive or negative operating cash flow, the magnitude of positive or negative operating cash flow and the fluctuations in cash flow from operations over time.Analyzing cash inflows is important to determine if the firm is generating cash from operations, the preferred method, or if the firm must rely on external sources.Using external sources to generate the majority of cash year after year should be investigated further.When analyzing the cash outflows, the analyst should consider the necessity of the outflow and how the outflow was financed.

Question 3

Which of the following would increase cash from operating activities?

Accepted Answer

A) Increasing accounts receivable. 
B) Increasing inventories. 
C) Decreasing accounts payable. 
D) Decreasing accounts receivable. 
A) Increasing accounts receivable. 
B) Increasing inventories. 
C) Decreasing accounts payable. 
D) Decreasing accounts receivable. D

Question 4

Discuss the format of a statement of cash flows prepared using the indirect method.

Accepted Answer

Regardless of format used the statement

Question 5

Repurchase of a firm's own shares is an investing cash outflow.

Accepted Answer

A) True 
 B)False

Question 6

Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?

Accepted Answer

A) Selling assets is a noncash item. 
B) Gains and losses from asset sales are a financing activity. 
C) Gains and losses are not removed from net income when calculating the cash flows from operating activities 
D) The entire proceeds from sales of long-lived assets are included in investing activities. 
A) Selling assets is a noncash item. 
B) Gains and losses from asset sales are a financing activity. 
C) Gains and losses are not removed from net income when calculating the cash flows from operating activities 
D) The entire proceeds from sales of long-lived assets are included in investing activities.

Question 7

What can be learned from a statement of cash flows?

Accepted Answer

The statement of cash flows shows how ca

Question 8

The following item would be classified as an investing activity on the statement of cash flows:

Accepted Answer

A) Proceeds from borrowing. 
B) Sale of goods. 
C) Sale of property. 
D) Payment to lenders. 
A) Proceeds from borrowing. 
B) Sale of goods. 
C) Sale of property. 
D) Payment to lenders.

Question 9

The________ ________ is one way to common size the cash flow statement.
For questions 5 through 10, insert the word "added" or "subtracted" in the blank.

Accepted Answer

The answer of The________ ________ is one way to common...

Question 10

A gain on sale of asset should be------to convert net income to cash flow from operating activities.

Accepted Answer

The answer of A gain on sale of asset should...

Question 11

Which item may be of concern when analyzing cash flow from financing activities?

Accepted Answer

A) Increasing inventories. 
B) Borrowing each year to repay debt from prior years. 
C) Repayment of debt. 
D) Payments of dividends. 
A) Increasing inventories. 
B) Borrowing each year to repay debt from prior years. 
C) Repayment of debt. 
D) Payments of dividends.

Question 12

Proceeds from borrowing are a financing cash outflow.

Accepted Answer

A) True 
 B)False

Question 13

An increase in inventory should be------to convert net income to cash flow from operating activities.

Accepted Answer

The answer of An increase in inventory should be------to convert...

Question 14

Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?

Accepted Answer

A) Accounts receivable. 
B) Depreciation. 
C) Accounts payable. 
D) Inventory.
Use the indirect method to answer questions 7-10.The following information is available for Armstrong Company:
$$\begin{array} { l r l r } 
\text { Net income } & \$ 450 & \text { Increase in plant and equip. } & \$ 170 \
\text { Depreciation expense } & 80 & \text { Payment of dividends } & 10 \
\text { Decrease in accts. receiv. } & 20 & \text { Increase in long-term debt } & 100 \
\text { Increase in inventories } & 15 & \text { Decrease in accounts payable } & 30
\end{array}$$ 
A) Accounts receivable. 
B) Depreciation. 
C) Accounts payable. 
D) Inventory.
Use the indirect method to answer questions 7-10.The following information is available for Armstrong Company:
$$\begin{array} { l r l r } 
\text { Net income } & \$ 450 & \text { Increase in plant and equip. } & \$ 170 \
\text { Depreciation expense } & 80 & \text { Payment of dividends } & 10 \
\text { Decrease in accts. receiv. } & 20 & \text { Increase in long-term debt } & 100 \
\text { Increase in inventories } & 15 & \text { Decrease in accounts payable } & 30
\end{array}$$

Question 15

The statement of cash flows shows the changes in the balance sheet accounts between periods.

Accepted Answer

A) True 
 B)False

Question 16

An analysis of the statement of cash flows should, at a minimum, cover the following areas: analysis of cash inflows, analysis of cash outflows, and an analysis of the structure of asset and liabilities.

Accepted Answer

A) True 
 B)False

Question 17

A change in the retained earnings account is the result of the________for the period and the payment of________ .

Accepted Answer

net income

Question 18

Depreciation and amortization should be------to convert net income to cash flow from operating activities.

Accepted Answer

The answer of Depreciation and amortization should be------to convert net...

Question 19

The analyst of financial statements should consider cash flows over a period of time, looking at patterns of performance and exploring underlying causes of strength and weakness.

Accepted Answer

A) True 
 B)False

Question 20

A decrease in accrued liabilities should be------to convert net income to cash flow from operating activities.

Accepted Answer

The answer of A decrease in accrued liabilities should be------to...

The following item would be classified as an operating activity on the statement of cash flows:

What are the three areas of a cash flow statement that an analyst should cover at a minimum? Discuss each area by explaining items an analyst should be concerned with when reviewing the cash flow statement.

Which of the following would increase cash from operating activities?

Discuss the format of a statement of cash flows prepared using the indirect method.

Repurchase of a firm's own shares is an investing cash outflow.

Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?

What can be learned from a statement of cash flows?

The following item would be classified as an investing activity on the statement of cash flows:

The is one way to common size the cash flow statement. For questions 5 through 10, insert the word "added" or "subtracted" in the blank.

A gain on sale of asset should be------to convert net income to cash flow from operating activities.

Which item may be of concern when analyzing cash flow from financing activities?

Proceeds from borrowing are a financing cash outflow.

An increase in inventory should be------to convert net income to cash flow from operating activities.

Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?

The statement of cash flows shows the changes in the balance sheet accounts between periods.

An analysis of the statement of cash flows should, at a minimum, cover the following areas: analysis of cash inflows, analysis of cash outflows, and an analysis of the structure of asset and liabilities.

A change in the retained earnings account is the result of thefor the period and the payment of .

Depreciation and amortization should be------to convert net income to cash flow from operating activities.

The analyst of financial statements should consider cash flows over a period of time, looking at patterns of performance and exploring underlying causes of strength and weakness.

A decrease in accrued liabilities should be------to convert net income to cash flow from operating activities.

Financial Statements: an Overview

The Balance Sheet

Income Statement and Statement of Stockholders Equity

The Analysis of Financial Statements

Filters

Exam 4: Statement of Cash Flows

The following item would be classified as an operating activity on the statement of cash flows:

What are the three areas of a cash flow statement that an analyst should cover at a minimum? Discuss each area by explaining items an analyst should be concerned with when reviewing the cash flow statement.

Which of the following would increase cash from operating activities?

Discuss the format of a statement of cash flows prepared using the indirect method.

Repurchase of a firm's own shares is an investing cash outflow.

Why are gains and losses from asset sales removed from net income when calculating the cash flows from operating activities?

What can be learned from a statement of cash flows?

The following item would be classified as an investing activity on the statement of cash flows:

The________ ________ is one way to common size the cash flow statement. For questions 5 through 10, insert the word "added" or "subtracted" in the blank.

A gain on sale of asset should be------to convert net income to cash flow from operating activities.

Which item may be of concern when analyzing cash flow from financing activities?

Proceeds from borrowing are a financing cash outflow.

An increase in inventory should be------to convert net income to cash flow from operating activities.

Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?

The statement of cash flows shows the changes in the balance sheet accounts between periods.

An analysis of the statement of cash flows should, at a minimum, cover the following areas: analysis of cash inflows, analysis of cash outflows, and an analysis of the structure of asset and liabilities.

A change in the retained earnings account is the result of the________for the period and the payment of________ .

Depreciation and amortization should be------to convert net income to cash flow from operating activities.

The analyst of financial statements should consider cash flows over a period of time, looking at patterns of performance and exploring underlying causes of strength and weakness.

A decrease in accrued liabilities should be------to convert net income to cash flow from operating activities.

Financial Statements: an Overview

The Balance Sheet

Income Statement and Statement of Stockholders Equity

The Analysis of Financial Statements

Filters

The is one way to common size the cash flow statement. For questions 5 through 10, insert the word "added" or "subtracted" in the blank.

A change in the retained earnings account is the result of thefor the period and the payment of .