Question 1 : Smith Company had sales of $60 million, an increase in accounts payable of $10 million, a decrease in accounts receivable of $2 million, and an increase in inventories of $8 million. How much cash was collected from customers?
$70 million
$62 million
$68 million
$58 million
Question 2 : Which of the following is not an item added back to income in the operations section of the statement of cash flows when using the indirect method of presentation?
Amortization of intangible assets
Increase in deferred income taxes
Amortization of bond premium
Depreciation
Question 3 : Temporary shortfalls of cash can be satisfied by borrowing or other means, such as selling long-lived assets, but ultimately a company must generate cash from operations.
True
False
Question 4 : Wesson Company reported sales of $100 million, tax expense of $10 million, and an increase in taxes payable of $2 million. What was its cash outflow for taxes?
$8 million
$90 million
$108 million
$12 million
Question 5 : The change in retained earnings is often the result of both operating and financing activities.
True
False
Question 6 : Which of the following is not a typical cash flow under investing activities?
Cash outflow for the purchase of property, plant, and equipment
Cash outflow for the repayment of amounts previously borrowed
Cash inflow from the sale of property, plant, and equipment
Cash outflow for loans made to other entities
Question 7 : There are two formats the FASB allows, the direct and the indirect method, for presenting cash flows from operating activities.
True
False
Question 8 : When analyzing a statement of cash flows the analyst should be concerned with the underlying causes of positive or negative operating cash flows.
True
False
Question 9 : Which of the following items would be classified as financing activities on the statement of cash flows?
Payments for inventory, payments to lenders, and payments for taxes
Loans to others, returns from loans to others, and the acquisition of land
Sales of goods, repayment of debt, and loans to others
Proceeds from borrowing, payment of dividends, and repayment of debt
Question 10 : The retirement of debt by the issuance of common stock should be presented in a statement of cash flows as ________.
cash flows from investing activities
cash flows from financing activities
a supplemental schedule of noncash investing and financing activities
cash flows from operating activities
Question 11 : It is possible for a company to post a healthy net income but still not have the cash needed to pay its employees, suppliers, and creditors.
True
False
Question 12 : In an indirect statement of cash flows, depreciation expense should be presented as ________.
an addition to net income
a cash flow from investing activities
a deduction from net income
a cash flow from financing activities
Question 13 : Analyzing a statement of cash flows is useful because ________.
any and all of these choices are correct
the statement of cash flows reveals why a company was able to generate a profit
focusing on net income can be misleading if a company has a healthy profit, but cannot translate the profit into cash
by documenting changes in retained earnings occurring during the year, the statement of cash flows provides a key link between the balance sheet and income statement data.
Question 14 : Which of the following is not a typical cash flow under financing activities?
Cash outflow for payment of dividends
Cash outflow for the repayment of amounts previously borrowed
Cash outflow for loans made to other entities
Cash inflow from the issuance of equity securities
Question 15 : Which of the following items would be classified as investing activities on the statement of cash flows?
Sale of property, purchase of equity securities, and loans to others
Payment to lenders, proceeds from issuing common stock, and revenue
Proceeds from borrowing, payment of dividends, and the receipt of dividends
Sale of goods, receipt of dividends, and repurchase of a firm's own stock
Question 16 : Which of the following items would likely be of concern when analyzing cash flow from operating activities?
Increasing inventories
Repayment of debt
Decreasing accounts receivable
Payments of dividends
Question 17 : Which of the following items could be indicative of cash flow problems or the result of an expansion?
Increasing accounts receivable and decreasing inventories
Decreasing accounts receivable and increasing inventories
Decreasing accounts receivable and decreasing inventories
Increasing accounts receivable and increasing inventories
Question 18 : What is implied if the accounts receivable account has increased?
The firm's sales have increased relative to the prior year.
Cash flow from operating activities is greater relative to net income.
Cash flow from operating activities is less relative to net income.
None of these choices are correct.
Question 19 : Which of the following is not found in the cash flows from financing activities section of the statement of cash flows that follows U.S. GAAP?
Issuance of new debt
Payment of interest on debt
Repurchase of common stock
Payment of cash dividends
Question 20 : Which of the following items would be classified as operating activities on the statement of cash flows?
Payments for inventory, payments for salaries, cash received from sale of goods
Proceeds from borrowing, payments of dividends, and purchases of supplies
Payments on loans, payments for taxes, payments for rent
Acquisitions of equipment, payment of dividends, revenue
Question 21 : Which of the following is not a typical cash flow under operating activities?
Cash outflows to suppliers
Cash inflows from interest
Cash inflows from sale of property, plant, and equipment
Cash inflows from sale of goods or services
Question 22 : If net cash provided or used by operating, financing and investing activities during 2017 are added together, the result is ________.
net income for 2017
the total cash outflow for 2017
the change in cash during 2017
the amount of cash reported on the balance sheet at the end of 2017
Question 23 : The statement of cash flows is helpful in determining the ability of a firm to generate cash flows in the future.
True
False
Question 24 : An increase in the number of accounts receivable of inferior quality or the tightening of credit by suppliers can both impair the firm's ability to generate cash flows from operations.
True
False
Question 25 : In theory, firms should only pay dividends if the company has excess cash not needed for expansion, capital expenditures, or repayment of debt.
True
False
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