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

When net income is high relative to operating cash flows, we describe the firm as having recorded:

Cash flows from ____________________ activities will normally be negative during the introduction and growth phase of the product life cycle.

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?

When net income is low relative to operating cash flows, we describe the firm as having recorded:

When preparing the statement of cash flows using the indirect method, an increase in inventories would appear as:

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:

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

Selected financial statement information for Filmco appears below: Calculate the amount of cash collected from customers and the amount of cash spent on inventory for 2010 by Filmco.

The financial statements for Warren Company show the following: Based on this information, cash paid for merchandise was:

Amortization of bond discount and premiums would be additions or subtractions from net income in the ___________________________ section of the statement of cash flows

Discuss the correlations that have been found between net income, net income plus or minus Type 1 adjustments (i.e., adjustments to net income for revenues, expenses, gains, and losses that are recognized in income and are associated with changes in noncurrent assets, noncurrent liabilities, and shareholders' equity, but do not affect cash by the same amounts for the period), and cash flow from operations.

Which of the following is the correct formula for calculating cash collections from customers?

Normally, cash flows from investing activities will start providing cash during which phase of the product life cycle?

Cilca Corporation is a supplier to the pulp and paper industry. Selected financial information about Cilca is listed below: · Purchased real estate for $440,000 in cash. The cash was borrowed from a bank. ·Sold investments for $400,000. · Paid dividends of $480,000. · Issued shares of common stock for $200,000. · Purchased machinery and equipment for $100,000 cash. · Paid $360,000 on a bank loan. ·Reduced accounts receivable by $80,000. · Increased accounts payable $160,000. Sales for the period were $450,000 Use the above information to calculate Cilca's: a. cash used or provided by operating activities b. cash used or provided by financing activities

Krenshaw Company reported total sales revenue of $80,000, total expenses of $72,000, and net income of $8,000 for the year ended December 31, 2009. During 2009, accounts receivable increased by $3,000, merchandise inventory decreased by $2,000, accounts payable increased by $1,000, and $5,000 in depreciation expense was recorded. Assuming no other adjustments to net income are needed, the net cash inflow from operating activities using the indirect method was:

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:

____________________ activities relate to the normal operations of the firm, selling goods and providing services.

Which of the following statements is true?

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

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. 1. Tech Corporation is a developer of computer software for the gaming industry. The company recently launched its first software title. The company is expanding its operations by hiring additional developers and administrative staff. The company is not yet profitable, but expects to break even within two years. Investors view it as having a first mover advantage and have been happy to invest in the company. 2. Midwest Corporation is a supplier to the agricultural industry. The company is experiencing its 25th year of profitability, but is concerned that sales have contracted for the fifth year in a row. Midwest prides itself in paying dividends and having no debt on its balance sheet. 3. Semi Inc. manufactures semiconductors. The company has just introduced its ninth new product and is the leader in market share for the industry. The company continues to invest in research and development and expand by purchasing competitors. The company has yet to pay dividends, but is considering it in the future. The company's largest current asset is cash, due to its high profit margin.