Question 1

Normally, cash flows from operations will peak during which phase of the product life cycle?

Accepted Answer

A)  Introduction 
B)  Growth 
C)  Maturity 
D)  Decline

Question 2

One rationale for the statement of cash flows is to

Accepted Answer

A)  ensure that the cash account balances at year-end. 
B)  reconcile differences between net income and cash receipts and disbursements. 
C)  calculate the company's free cash flow. 
D)  examine the cash effects of income from discontinued operations, extraordinary items and changes in accounting principles.

Question 3

When preparing the statement of cash flows using the indirect method an increase in accounts payable would appear as

Accepted Answer

A)  a decrease in the operating activities section 
B)  an increase in the operating activities section 
C)  a use of cash in the investing activities section 
D)  a source of cash in the investing activities section

Question 4

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

Accepted Answer

The answer of Cash flows from ____________________ activities will normally...

Question 5

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers, for this reason

Accepted Answer

A)  their cash flow from operations will be much greater than their working capital from operations. 
B)  their cash flow from operations will not differ much from their working capital from operations. 
C)  their cash flow from operations will be much less than their working capital from operations. 
D)  there will be no relation between their cash flow from operations and working capital from operations.

Question 6

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method

Accepted Answer

A)  Subtract depreciation expense 
B)  add depreciation expense 
C)  add an increase in accounts receivable 
D)  add a decrease in accounts payable

Question 7

Discuss operating, investing and financing cash flows in relation to the various stages of the product life cycle.

Accepted Answer

The answer of Discuss operating, investing and financing cash flows...

Question 8

What is working capital from operations? Discuss what types of firms will have similar net income and working capital from operations? For which types of firms will net income and working capital from operations be significantly different?

Accepted Answer

The answer of What is working capital from operations? Discuss...

Question 9

An increase in accounts receivable during a period indicates that a firm did not collect as much ____________________ as the amount of revenues included in net income.

Accepted Answer

The answer of An increase in accounts receivable during a...

Question 10

Many analysts use ____________________ as a crude measure of a firm's ability to pay down debt.

Accepted Answer

The answer of Many analysts use ____________________ as a crude...

Question 11

Free cash flows to all debt and common equity shareholders represents the excess of cash flow from operations over cash flows from ___________________________________.

Accepted Answer

The answer of Free cash flows to all debt and...

Question 12

One factor that may cause cash flow from operations to differ from net income is the length of the ______________________________.

Accepted Answer

The answer of One factor that may cause cash flow...

Question 13

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

Accepted Answer

The answer of Cash flows from ____________________ activities will normally...

Question 14

The payment of dividends would be classified as ____________________ activities in the statement of cash flows.

Accepted Answer

The answer of The payment of dividends would be classified...

Question 15

Which of the following companies would you expect to report significant amounts of cash provided by financing activities?

Accepted Answer

A)  A yet to be profitable biotechnology company. 
B)  A mature company operating in the oil refinery industry. 
C)  A profitable established company in the retail industry. 
D)  A large multinational pharmaceutical company.

Exam 3: Income Flows Versus Cash Flows: Key Relationships in the Dynamics of a Business

Normally, cash flows from operations will peak during which phase of the product life cycle?

One rationale for the statement of cash flows is to

When preparing the statement of cash flows using the indirect method an increase in accounts payable would appear as

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

Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers, for this reason

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method

Discuss operating, investing and financing cash flows in relation to the various stages of the product life cycle.

What is working capital from operations? Discuss what types of firms will have similar net income and working capital from operations? For which types of firms will net income and working capital from operations be significantly different?

An increase in accounts receivable during a period indicates that a firm did not collect as much ____________________ as the amount of revenues included in net income.

Many analysts use ____________________ as a crude measure of a firm's ability to pay down debt.

Free cash flows to all debt and common equity shareholders represents the excess of cash flow from operations over cash flows from ___________________________________.

One factor that may cause cash flow from operations to differ from net income is the length of the ______________________________.

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

The payment of dividends would be classified as ____________________ activities in the statement of cash flows.

Which of the following companies would you expect to report significant amounts of cash provided by financing activities?