Deck 13: Statement of Cash Flows

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

With regard to the information included on a statement of cash flows, which of the following statements is true?

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.

Answer 3

B

Question 4

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

Question 5

For anything to be considered 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 6

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

Question 7

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

Question 8

A statement of cash flows is generated to show

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

Question 9

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 10

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

Question 11

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

Question 12

Which of the following is true about 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 may be combined with the income statement.
D)The statement of cash flows does not have to be completed if an income statement is prepared.

Question 13

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

Question 14

The operating activities section of the statement of cash flows is the most important section.

Question 15

A purpose for the statement of cash flows could be which of the following?

A)To evaluate board of directors' decisions
B)To determine the ability to pay dividends to stockholders and interest and principle to creditors
C)To help predict management's future decisions
D)To report the earnings per share

Question 16

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

Question 17

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

Question 18

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, 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 19

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

A)Creditors expecting loans and interest to be repaid
B)Employees expecting to be reimbursed for their work
C)Investors expecting a dividend
D)All of the above are parties interested in the cash of a company

Question 20

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

Question 21

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 22

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 23

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 24

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 25

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

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 26

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 27

Which of the following descriptions do apply to cash equivalents?

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

Question 28

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 29

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 30

The ________ section from the statement of cash flows includes loans to others and collections on loans.

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

Question 31

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 32

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 33

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

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

Question 34

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 35

Which of the following sections from 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 36

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 37

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 38

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 39

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 40

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 41

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 42

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)payments to the government for taxes.
D)owner withdrawal from the company.

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

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 45

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 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

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 48

The ________ 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 49

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 50

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 51

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 52

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 53

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 54

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

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

Question 55

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 56

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 57

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 58

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 59

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 60

Creditor and stockholder transactions are considered ________ activities.

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

Question 61

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 62

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

Question 63

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 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

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 66

When a company uses the indirect method to present the statement of cash flows, an increase in a current liability must be subtracted from net income to reconcile to net cash provided by operating activities.

Question 67

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 68

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 69

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

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

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 72

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

A)Dividends paid to stockholders
B)Gain on sale of short-term investments
C)The sale of inventory
D)The receipt of stock dividends from investment stock

Question 73

When a company uses the indirect method to present the statement of cash flows, depreciation expense must be subtracted from net income to reconcile to net cash provided by operating activities.

Question 74

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 75

The indirect method of presenting the investing activities section of the statement of cash flow reconciles net income to net cash provided by investing activities.

Question 76

When a company uses the indirect method to present the statement of cash flows, cash received from the sale of a long-term asset increases the amount of net cash provided by investing activities.

Question 77

When a company uses the indirect method to present the statement of cash flows, a gain on the sale of a long-term asset must be added to net income to reconcile to net cash provided by operating activities.

Question 78

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 79

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 80

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