Cash Flows
Which of the following is not a benefit of the statement of cash flows?
a. It focuses on cash flows, which are difficult for managers to manipulate.
b. It reconciles the change in cash from the balance sheet.
c. It is logically organized into three intuitive sections: operating, investing and financing.
d. It highlights accruals as the difference between net income and operating cash flows.
What is a. It focuses on cash flows, which are difficult for managers to manipulate.
On the statement of cash flows, financing activities
a. capture cash inflows from the unplanned sale or liquidation of investments of idle cash.
b. include cash flows generated from the investment of debt or equity capital in productive assets.
c. are the primary source of cash flows for mature businesses.
d. summarize cash received or paid back to banks and shareholders.
What is d. summarize cash received or paid back to banks and shareholders.
Why does depreciation appear as a positive adjustment in the operating section of an indirect statement of cash flows?
a. Depreciation expense needs to be included in the investing section.
b. Depreciation expense reduces net income, the starting point of the statement of cash flows, but does not require a cash outflow.
c. A negative adjustment would reduce cash flows from operating activities.
d. Long-lived assets are frequently financed with borrowings, which are a financing activity.
What is b. Depreciation expense reduces net income, the starting point of the statement of cash flows, but does not require a cash outflow.
A company reports a net loss of $773 million, cash flows from operating activities of $(124) million, cash flows from investing activities of $(1,416) million, and cash flows from financing activities of $3,744 million. What is the change in cash on the balance sheet during the year?
a. $1,431 million
b. $2,204 million
c. $(897) million
d. $(773) million
what is b. 2,204 million
An indirect statement of cash flows
a. is more common than a direct method statement of cash flows.
b. reports cash inflows and outflows within three different sections.
c. can be useful in identifying significant estimates and choices made by managers under accrual accounting.
d. All of these answer choices are correct.
What is d. All of these answer choices are correct.
For early-stage businesses,
a. cash flows from financing activities tend to be close to zero.
b. cash flows from financing activities depend on whether capital comes from banks versus equity investors.
c. cash flows from financing activities tend to be negative.
d. cash flows from financing activities tend to be positive.
What is d. Cash flows from financing activities tend to be positive.
A company has accounts receivable of $4,200 at the beginning of the year and $5,000 at the end of the year. Which of the following best describes the adjustment for accounts receivable that would appear in the indirect statement of cash flows?
a. The adjustment would be for $(800), indicating a source of cash.
b. The adjustment would be for $800, indicating a use of cash.
c. The adjustment would be for $(800), indicating a use of cash.
d. The adjustment would be for $800, indicating a source of cash.
what is c. The adjustment would be for $(800), indicating the use of cash.
A company reports a net loss of $773 million, cash flows from operating activities of $(124) million, cash flows from investing activities of $(1,416) million, and cash flows from financing activities of $3,744 million. This company is likely in what stage of the business life cycle?
a. Introduction
b. Decline
c. Maturity
d. Growth
What is a. Introduction
On the statement of cash flows, operating activities
a. involve cash outflows for investments in long-lived assets.
b. are the primary source of cash flows for early-stage enterprises.
c. include activities related to the production and delivery of goods or services.
d. include noncash transactions such as the purchase of inventory with common stock
What is c. Include activities related to the production and delivery of goods or services.
For very mature businesses,
a. cash flows from operating and financing activities tend to be positive.
b. cash flows from operating activities tend to be positive, and cash flows from financing activities tend to be negative.
c. cash flows from operating activities tend to be negative, and cash flows from financing activities tend to be positive.
d. cash flows from operating and financing activities tend to be negative
What is b. Cash flows from operating activities tend to be positive, and cash flows from financing activities tend to be negative.
A company has accounts payable of $315,000 at the beginning of the year and $618,000 at the end of the year. Which of the following best describes the adjustment for accounts payable that would appear in the indirect statement of cash flows?
a. The adjustment would be for $(303,000), indicating a source of cash.
b. The adjustment would be for $303,000, indicating a source of cash.
c. The adjustment would be for $303,000, indicating a use of cash.
d. The adjustment would be for $(303,000), indicating a use of cash.
what is b. The adjustment would be for $303,000, indicating a source of cash.
A company reports the following balances as of the beginning and end of the year:
PP&E (gross) Accumulated depreciation
Beg of year $60,000 $20,000
End of year $80,000 $25,000
There were no dispositions during the year. What is your best estimate of the amounts and locations on the statement of cash flows for depreciation and capital expenditures?
a. $5,000 subtraction for depreciation expense in the operating section; $20,000 addition for capital expenditures in the investing section
b. $5,000 addition for depreciation expense in the operating section; $20,000 addition for capital expenditures in the investing section
c. $5,000 addition for depreciation expense in the operating section; $20,000 subtraction for capital expenditures in the investing section
d. $5,000 subtraction for depreciation expense in the operating section; $20,000 subtraction for capital expenditures in the investing section
What is c.$5,000 addition for depreciation in the operating section; $20,000 subtraction for capital expenditures in the investing section.
On the statement of cash flows, investing activities
a. would not include acquisitions or divestitures of businesses or business units.
b. include bank borrowings only if those borrowings are collateralized by long-lived assets.
c. summarize cash outflows for the acquisition of long-lived assets, as well as cash inflows from the disposal of long-lived assets.
d. include activities related to the production and delivery of goods or services
What is c. summarize cash outflows for the acquisition of long-lived assets, as well as cash inflows from the disposal of long-lived assets.
Large negative cash flows from operations
a. can indicate a poorly run, unprofitable business.
b. can reflect a business in the introduction phase, which is requiring large investments in working capital such as accounts receivable and inventory.
c. cannot occur indefinitely.
d. All of the answer choices are correct
What is s. All of the answer choices are correct
A company overstates revenues by €1.2 million by overstating accounts receivable. The best characterization of the effect of this misstatement is
a. overstated net income and no effect on operating cash flows.
b. no effect on the statement of cash flows.
c. overstated net income and overstated operating cash flows.
d. overstated net income and understated operating cash flows.
What is a. Overstated net income and no effect on operating cash flows.
A company reports the following changes in account balances. And they paid no dividends during the year.
*Insert picture*
What are operating, investing, and financing cash flows, respectively, for Year 2?
a. 0, (1,000), 1,000
b. 0, (2,000), 1,000
c. (2,000), (2,000), 1,000
d. (1,000), (2,000), 1,000
What is d. (1,000), (2,000), 1,000