Exam 9: The Cash Flow Statement: Content and Use

An Accounts Receivable account (a current asset) includes increases due to the credit sales and decreases due to collections of accounts receivable.

What are cash flows from financing activities? Provide some examples to support your answer.

To begin its operating cycle, a business buys inventory for cash or on credit (increasing accounts payable).

Operating activities include:

A cash flow statement shows the changes in a business' cash during:

Briefly explain the three main sections within a cash flow statement and provide some examples of items that would normally be contained within each section.

Financing activities are transactions that affect investments in non-current assets of the business.

Which of the following type of transaction will NOT cause a business cash inflow?

For each of the following situations indicate the items to be reported on the statement of cash flows, the section of the statement in which the item would appear and the amount. a) The board of directors declared cash dividends totalling $240 000 which were paid during the current year. b) Office equipment, which had cost $245 000 and on which accumulated depreciation totalled $95 000 on the date of sale, was sold for $130 000 during the year. c) Delivery equipment, which had cost $39 000 and on which accumulated depreciation totalled $23 000 on the date of sale, was sold for $20 000 during the year. d) Received cash from the issue of 5 000 shares at $50 per share during the year. e) The company purchased land with a mortgage note payable. f) Depreciation expense reported on the income statement was $55 000. g) Repaid bank loan of $60 000.

Managers are able to use the information in the cash flow statement in much the same way as external users do.

Cash flows classified as ____________________activities are from transactions that affect investments in non-current assets of the business.

External users can compare the business' net cash flow from operating activities for a given year with that year's income from operations to assess how well its operating activities provide cash.

The Salaries Payable account (a current liability) includes decreases due to salaries owed to employees at the end of the current accounting period.

If the accounts receivable balance decreases during the accounting period, this means that:

Managers can evaluate their business' operating performance by comparing the information from the operating activities section of the business' cash flow statement with the projected operating cash flow in the cash budget.

One type of transaction that may cause cash outflows, involves increases in _________________ other than cash.

To determine if a business is generating enough cash to pay its debts, financial statement users can assess:

A business's ability to generate enough cash to remain in business and earn a satisfactory profit can also be studied by computing its cash flow returns.

The cash return ratios help managers and external users assess whether or not the business is generating enough cash from its investing activities.

Cash inflows are caused by certain decreases in ____________________, increases in ____________________, and increases in ____________________ during an accounting period.