Exam 9: The Cash Flow Statement: Content and Use

Briefly explain what is cash from operating activities.

Cash flows from the operating activities provides financial statement users with information about its ability to obtain cash from its ___________ activities.

A business' ending cash balance is the amount of cash listed on its bank statement at the end of the current accounting period.

A Sales Revenue account normally includes both cash and credit sales.

Under the indirect method of calculating cash flow from operating activities, income inflows are converted from an _________________ basis to a ____________________ basis.

By reviewing a business' cash flow statement, external users can see how a business obtained and used its cash.

Identify which section of the statement of cash flows each of the following events would appear in (operating, investing and financing or not applicable): a) Purchased a patent b) Sold shares in a listed company c) Cash paid to suppliers d) Bought long-term investments e) Purchased a building f) Received new loan from bank. g) Paid dividends h) Purchased inventory on credit i) Issued shares for cash.

Why is the cash flow statement important?

The operating cash flow margin describes how much net cash the business generated from each dollar of net assets.

A cash flow statement shows the changes in a business' cash during an accounting period by listing the ____________________ and ____________________ of cash from its operating, investing and financing activities during the period.

Briefly explain the purpose of the 'operating cash flow margin' ratio.

Operating activities include the primary activities of buying, selling and delivering goods for sale.

If the Inventory account decreases during the accounting period, this means more inventory was purchased than sold.

Under the direct method, a business adjusts its net income to calculate the net cash flow from operating activities.

The cash inflows and cash outflows for operating activities are not ________ to the revenue and expenses included in net income.

Which of the following is NOT an example of a cash outflow?