Deck 13: Statement of Cash Flows

Question 1

Financing activities include transactions that affect long-term liabilities and stockholder's equity on the balance sheet.

Answer 1

True

Question 2

Investing activities include activities that affect the current asset section of the balance sheet.

Answer 2

False

Question 3

The ________ reports an entity's cash receipts and cash payments during the period.

A)income statement
B)statement of retained earnings
C)balance sheet
D)statement of cash flows

Answer 3

D

Question 4

The statement of cash flows reflects cash flows during a period of time.

Question 5

Cash equivalents include investments that cannot be readily converted into cash.

Question 6

Which of the following is/are created by operating activities?

A)An increase in long-term debt
B)An increase in common stock
C)Revenues and expenses
D)Both A and B

Question 7

A statement of cash flows is generated to show

A)the revenues the company has earned during the period.
B)the expenses the company incurred during the period.
C)how profits were generated during the period.
D)the inflow and outflow of cash during the time period.

Question 8

Regarding the statement of cash flows, which of the following is true?

A)The statement of cash flows reports why cash increased or decreased during the period.
B)The statement of cash flows covers a span of time and is dated "Year Ended, Month, Day, and Year."
C)The statement of cash flows shows where cash came from and how cash was spent.
D)All of the above are true of the statement of cash flows.

Question 9

Investors and management use the statement of cash flows to evaluate a firm's profitability.

Question 10

The operating activities section of the statement of cash flows includes paying dividends and paying off loans.

Question 11

The three sections of the Statement of Cash Flows are operating activities, investing activities, and capital activities.

Question 12

The statement of cash flows shows not only the amount of cash used during a particular time, but also how the cash was used.

Question 13

Operating activities on the statement of cash flows include activities that affect net income, current liabilities and current assets.

Question 14

For purposes of the statement of cash flows, "cash" includes cash on hand, cash in the bank and cash equivalents.

Question 15

For an investment to be considered as a "cash equivalent," the investment must be

A)convertible to a known amount of cash.
B)convertible to cash within 5 years.
C)convertible to cash without loss of value.
D)convertible to cash within 1 year.

Question 16

The statement of cash flows does not report why cash increased or decreased during the period.

Question 17

Which of the following parties would have an interest in the amount of cash at a company?

A)Creditors expecting consumers to repay loans and interest
B)Employees expecting payment for their work
C)Investors expecting a dividend
D)All of the above are parties interested in the amount of cash at a company

Question 18

The three sections of the Statement of Cash Flows are operating activities, investing activities, and financing activities.

Question 19

Which of the following statements is true about the information in a statement of cash flows?

A)The statement of cash flows contains information about stock splits and stock dividends distributed by the company.
B)The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods.
C)The statement of cash flows contains information about the business's percentage change in each item of revenue and expense.
D)The statement of cash flows contains information about the differences between net income and additions to retained earnings.

Question 20

Which of the following statements is true about information in a statement of cash flows?

A)The statement of cash flows is one of the required financial statements for publicly-held companies.
B)The statement of cash flows is prepared at the option of management.
C)The statement of cash flows is combined with the income statement.
D)The statement of cash flows is not completed when an income statement is prepared.

Question 21

Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term assets?

A)Investing section
B)Operating section
C)Financing section
D)None of the above

Question 22

The ________ section from the statement of cash flows includes activities that create revenue, expenses, gains and losses.

A)investing
B)operating
C)financing
D)None of the above

Question 23

On the statement of cash flows, which of the following sections includes the issuance of stock and the payment of dividends?

A)Financing section
B)Investing section
C)Operating section
D)None of the above

Question 24

The ________ section from the statement of cash flows includes activities that affect net income on the income statement.

A)operating
B)financing
C)investing
D)None of the above

Question 25

Which of the following items is NOT one of the three sections on the statement of cash flows?

A)Cash from capital activities
B)Cash from operating activities
C)Cash from financing activities
D)Cash from investing activities

Question 26

The three major categories included on the statement of cash flows are

A)investing, capital and financing activities.
B)investing, operating and financing activities.
C)investing, operating and capital activities.
D)financial, operating and capital activities.

Question 27

The ________ section from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet.

A)investing
B)operating
C)financing
D)None of the above

Question 28

On the statement of cash flows, which of the following sections includes borrowing money and paying off loans?

A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 29

Which of the following is an acceptable basis for the preparation of the statement of cash flows?

A)The sum of cash, inventory, and money market accounts
B)The sum of cash and accounts receivable
C)Cash
D)The sum of cash and cash equivalents

Question 30

Which of the following sections from the statement of cash flows includes purchases and sales of long-term assets?

A)Financing section
B)Investing section
C)Operating section
D)None of the above

Question 31

The ________ is the most important section on the statement of cash flows because it reflects the day-to-day operations that determine the future of an organization.

A)operating section
B)financing section
C)investing section
D)None of the above

Question 32

The correct order of the sections on a statement of cash flows is

A)operating, investing, financing.
B)financing, investing, operating.
C)investing, operating, financing.
D)operating, financing, investing.

Question 33

On the statement of cash flows, which of the following sections would include the purchase of a building paid for with cash?

A)Investing section
B)Operating section
C)Financing section
D)None of the above

Question 34

Activities that are included in the operating activities section of the statement of cash flows include which of the following activities?

A)Activities that obtain the cash needed to launch and sustain the business
B)Activities that increase or decrease long-term assets
C)Activities that create revenue or expenses in the entity's major line of business
D)None of the above

Question 35

If a corporation shows a net loss on its income statement, which of the following is true?

A)The company may not be able to sell stock.
B)The company may continue to have a net increase in cash.
C)The company may not be able to pay dividends.
D)The company may continue to have an increase in retained earnings.

Question 36

On the statement of cash flows, which of the following section includes activities that increase and decrease long-term liabilities and owners' equity?

A)Operating section
B)Financing section
C)Investing section
D)None of the above

Question 37

On the statement of cash flows, which of the following sections includes the purchase and sale of treasury stock?

A)Investing section
B)Operating section
C)Financing section
D)None of the above

Question 38

Which of the following items is one of the three sections on the statement of cash flows?

A)Retained earnings
B)Total liabilities
C)Total stockholder's equity
D)Cash from investing activities

Question 39

Which of the following descriptions apply to cash equivalents?

A)Cash equivalents' values change because the interest rate changes.
B)Cash equivalents are invested in fixed assets.
C)Cash equivalents are highly liquid.
D)Cash equivalents are long-term.

Question 40

The ________ section from the statement of cash flows includes activities that affect the buying and selling of long term assets on the balance sheet.

A)investing
B)operating
C)financing
D)None of the above

Question 41

Which of the following is the primary source of cash over the life of a business?

A)Financing activities
B)Operating activities
C)Investing activities
D)None of the above

Question 42

All of the following are cash inflows from a financing activity except

A)additional owner investment.
B)issuance of stock.
C)mortgage proceeds.
D)interest revenue on loans.

Question 43

A payment of interest on a loan would be considered a

A)cash outflow from investing activities.
B)cash outflow from operating activities.
C)cash outflow from financing activities.
D)cash outflow from depreciation.

Question 44

Which of the following activity sections on the statement of cash flows would include the acquisition of a building by issuing common stock?

A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 45

An outflow of cash from an investing activity would be

A)making loans to third parties.
B)issuing notes payable.
C)paying cash dividends to stockholders.
D)purchasing treasury stock.

Question 46

Paying cash dividends would be

A)a cash outflow from operations.
B)a cash outflow from financing.
C)a cash outflow from investing.
D)none of the above.

Question 47

All of the following are examples of cash outflows from an investing activity except

A)purchase of equity securities.
B)loans made to another party.
C)purchase of commercial real estate.
D)purchase of treasury stock.

Question 48

Cash received from providing services would be considered a

A)cash inflow from investing activities.
B)cash outflow from operating activities.
C)cash inflow from financing activities.
D)cash inflow from operating activities.

Question 49

The primary source of cash over the life of a business is ________.

A)investing activities
B)financing activities
C)operating activities
D)None of the above

Question 50

The ________ activities section from the statement of cash flows includes cash loans paid to others and cash collections on loans from issuing long-term debt.

A)investing
B)financing
C)operating
D)None of the above

Question 51

Buying and selling property, plant and equipment would be considered in

A)the investing portion of the statement of cash flows.
B)the operating portion of the statement of cash flows.
C)the financing portion of the statement of cash flows.
D)none of the above portions of the statement of cash flows.

Question 52

Issuing preferred stock to stockholders would be a

A)cash inflow from investing.
B)cash inflow from operations.
C)cash inflow from depreciation.
D)cash inflow from financing.

Question 53

The ________ activities section from the statement of cash flows would include the payment of a long-term mortgage payable with cash.

A)investing
B)financing
C)operating
D)None of the above

Question 54

Of the following, which is not a cash inflow from a financing activity?

A)Issuance of preferred stock
B)Issuance of common stock
C)Sale of long-term investment
D)Proceeds from issuance of long-term debt

Question 55

Creditor and stockholder transactions are considered ________ activities.

A)financing
B)planning
C)operating
D)investing

Question 56

Of the following, which is not a cash outflow from an investing activity?

A)Payment of cash dividends
B)Loans made to another party
C)Investments in subsidiary
D)Purchase of new building

Question 57

Money borrowed for a mortgage would be a(n)________ activity.

A)operating
B)financing
C)investing
D)non-cash

Question 58

Cash received from selling merchandise would be considered a

A)cash inflow from investing activities.
B)cash inflow from financing activities.
C)cash inflow from operating activities.
D)cash outflow from operating activities.

Question 59

All of the following are cash outflows from an operating activity except

A)payment of interest on a loan.
B)payment for purchasing inventory.
C)payment to the government for tax bill.
D)owner withdrawal from the company.

Question 60

The purchase of inventory would be considered a

A)cash outflow from investing activities.
B)cash outflow from operating activities.
C)cash outflow from financing activities.
D)cash outflow from depreciation.

Question 61

For each of the following transactions, indicate the section in which it may be included. Use O for the operating section, I for the investing activities section, and F for the financing section of the Statement of Cash Flows.
________ a. Payment of dividends
________ b. Issuance of stock
________ c. Payment of salaries
________ d. Cash purchase of equipment
________ e. Payment of accounts payable
________ f. Payment of interest on long-term debt
________ g. Receipt of cash dividends
________ h. Increase in accounts receivable
________ i. Cash sale of building
________ j. Gain on sale of land

Question 62

How can a company that has shown net income in recent years be required to declare bankruptcy? How can the statement of cash flows provide an advanced warning about this possibility?

Question 63

On the statement of cash flows, which of the following activities are included in the financing activities section?

A)Activities that increase or decrease long-term assets
B)Activities that obtain the cash needed to launch and sustain the business
C)Activities that create revenue or expenses in the entity's major line of business
D)None of the above

Question 64

Comparative balance sheets analyze balance sheets by comparing the ending balances of two fiscal periods; usually highlighting the changes in each account.

Question 65

For each of the following transactions indicate the effect on the cash balance. Use + for increase, - for decrease, and 0 for no effect.
________ a. Payment of cash dividends
________ b. Payment of interest
________ c. Sale of treasury stock
________ d. Conversion of debt to common stock
________ e. Payment of accounts payable
________ f. Payment of salaries
________ g. Receipt of cash dividends
________ h. Sale of merchandise for cash
________ i. Acquisition of a patent by issuing common stock
________ j. Purchase of land
________ k. Receipt of stock dividends

Question 66

For each of the following independent transactions, indicate the type of activity (operating, investing or financing)and the effect on cash (amount and increase or decrease).

Question 67

Which of the following would be considered an investing activity on the statement of cash flows?

A)An issuance of stock
B)A sale of equipment
C)Payment of dividends
D)Purchase of inventory

Question 68

On the statement of cash flows, which of the following items would be reported as an operating activity?

A)A purchase of treasury stock
B)A payment of dividends
C)A payment of interest
D)An issuance of stock

Question 69

Where are noncash investing and financing activities reported?

A)The financing activities section of the statement of cash flows
B)A schedule accompanying the statement of cash flows
C)The investing activities section of the statement of cash flows
D)In both A and B

Question 70

On the statement of cash flows, which of the following items would be reported in the financing activities section?

A)Cash paid for interest
B)Cash received from customers
C)Cash received from a sale of treasury stock
D)Cash paid for operating expenses

Question 71

List three ways that owners and investors use the statement of cash flows.

Question 72

On the statement of cash flows, which of the following would be considered an investing activity?

A)A purchase of treasury stock
B)A sale of land
C)Depreciation of equipment
D)A sale of inventory

Question 73

Which of the activities sections of the statement of cash flows would include a loss of $20,000 from the sale of equipment?

A)Investing
B)Operating
C)Financing
D)Would not be on the statement of cash flows

Question 74

Which of the following items would be reported as an operating activity on the statement of cash flows?

A)Purchase of equipment
B)A payment of dividends
C)Payment for rent
D)Sale of equipment

Question 75

Which of the following activities are included in the investing activities section of the statement of cash flows?

A)Activities that obtain the cash needed to launch and sustain the business
B)Activities that increase or decrease long-term assets
C)Activities that create revenue or expenses in the entity's major line of business
D)None of the above

Question 76

Which of the following would be considered an operating activity on the statement of cash flows?

A)Dividends paid to stockholders
B)Purchase of land
C)The sale of inventory
D)The receipt of stock dividends from investment stock

Question 77

Which of the following items would be reported in the financing activities section on the statement of cash flows?

A)Cash paid for rent
B)Cash received from sale of inventory
C)Cash received from issuance of long-term debt
D)Cash paid for land

Question 78

The ________ section from the statement of cash flows would include the issuance of a stock dividend.

A)operating
B)financing
C)investing
D)None of the above

Question 79

For each of the following transactions, indicate the section in which it may be included. Use O for the operating section, I for the investing activities section, F for the financing section, S for a separate schedule of noncash investing and financing activities, and N for items not disclosed on the statement of cash flows.
________ a. Paid cash dividends
________ b. Paid interest on a short-term note payable
________ c. Sold treasury stock for cash
________ d. Converted debt to common stock
________ e. Paid accounts payable
________ f. Paid salaries
________ g. Received cash dividends
________ h. Sold merchandise for cash
________ i. Acquired a patent by issuing common stock
________ j. Purchase of land using preferred stock
________ k. Received stock dividends

Question 80

Identify and describe the three sections of the statement of cash flows.