Question 1

Olive Corporation manufactures food processing equipment.Use Olive Corporation's two most recent balance sheets and most recent income statement to prepare a statement of cash flows for 2010.The company paid dividends of $6,250 during 2010.

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Question 2

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

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Question 3

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

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Question 4

Under the ______________________________ of preparing the statement of cash flow's operating activities section firms list the cash flows from selling goods and services and then subtract the cash outflows to providers of goods and services.

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Question 5

Cash collected from customers would appear in the operating activities section of a statement of cash flows prepared using the ____________________ method

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Question 6

Luke Corporation is a manufacturer of home furnishings.Selected financial information about Luke is listed below:
•Borrowed $850,000 from a bank.
 Purchased equipment for $210,000 in cash.
•Purchase investments for $285,000.
•Received dividends of $51,000 from an investment in Davis Corp.
•Paid dividends of $55,000.
•Issued shares of preferred stock for $500,000.
 Repurchased outstanding common shares using $100,000 in cash.
•Purchased land for $100,000 cash.
•Paid $36,000 interest expense on a bank loan.
•Increased Inventories by $320,000
•Increased accounts receivable by $217,000.
•Increased accounts payable $85,000.
Use the above information to calculate Luke's:a.cash used or provided by investing activities
b.cash used or provided by financing activities

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Question 7

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?

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Question 8

EBITDA not only ignores four expenses but also ignores changes in __________________________________________________ accounts.

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Question 9

J.Jill is a women's clothing retailer.The company started as a mail order company and has expanded into mall department stores.The company now receives approximately half of its revenues from mail order and half from retail outlets.Over the time period 2010 to 2012,sales increased approximately 25%.
Discuss the relationship between net income,working capital from operations,and cash flow from operations,and between cash flows from operating,investing,and financing activities over the three-year period.

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Question 10

The issuance of debt would be classified as a (an)____________________ activity in the statement of cash flows.

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Question 11

Discuss the correlations that have been found between net income,net income plus or minus Type 1 adjustments (i.e.,adjustments to net income for revenues,expenses,gains,and losses that are recognized in income and are associated with changes in noncurrent assets,noncurrent liabilities,and shareholders' equity,but do not affect cash by the same amounts for the period),and cash flow from operations.

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Question 12

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

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Question 13

Selected financial statement information for Filmco appears below:
 $$\begin{array} { l r r } 
\text { Balance Sheet accaunts } & \text { Jan. 1, 2010 } & \text { Dec. 31, 2010 } \
\text { Inventary } & \$ 210,000 &\$ 85,000  \
\text { Accounts Receivable } &  \$ 90,000 &\$ 45,000 \

\end{array}$$ 
  
Calculate the amount of cash collected from customers and the amount of cash spent on inventory for 2010 by Filmco.

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Question 14

Cash flow from operations should include none of the cash flows associated with marketable securities if such transactions are viewed as ___________________________________.

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Question 15

Cilca Corporation is a supplier to the pulp and paper industry.Selected financial information about Cilca is listed below:
•Purchased real estate for $440,000 in cash.The cash was borrowed from a bank.
•Sold investments for $400,000.
•Paid dividends of $480,000.
•Issued shares of common stock for $200,000.
•Purchased machinery and equipment for $100,000 cash.
•Paid $360,000 on a bank loan.
•Reduced accounts receivable by $80,000.
•Increased accounts payable $160,000.
Sales for the period were $450,000
Use the above information to calculate Cilca's:
a.cash used or provided by operating activities
b.cash used or provided by financing activities

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Question 16

The calculation of cash flow from operations under the indirect method involves two types of adjustments.Discuss each type of adjustment and provide an example of each type of adjustment.

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Question 17

Listed below is a list of cash inflows and cash outflows for Toggle Inc.
1.Cash received from issuing debt
2.Cash received from interest earned on a bond investment
3.Cash used to purchase property
4.Cash used to repay debt
5.Cash received from collections of loans
6.Cash paid for retiring common stock
7.Cash paid to employees for salaries
8.Cash from the sale of marketable securities
9.Cash used to pay dividends
10.Cash from the sale of services to customers
11.Cash paid to government agencies for taxes
12.Cash received from the sale of equipment
For each item indicate where it should appear on Toggle's statement of cash flows.Select from:
a.Cash inflows from operating activities
b.Cash outflows from operating activities
c.Cash inflows from investing activities
d.Cash outflows from investing activities
e.Cash inflows from financing activities
f.Cash outflows from financing activities

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Question 18

For the following types of companies,discuss whether you think their cash flows from operations,investing,and financing will be positive (the activity provides cash)or negative (the activity uses cash).Provide support for your answer.
1.Tech Corporation is a developer of computer software for the gaming industry.The company recently launched its first software title.The company is expanding its operations by hiring additional developers and administrative staff.The company is not yet profitable,but expects to break even within two years.Investors view it as having a first mover advantage and have been happy to invest in the company.
2.Midwest Corporation is a supplier to the agricultural industry.The company is experiencing its 25th year of profitability,but is concerned that sales have contracted for the fifth year in a row.Midwest prides itself in paying dividends and having no debt on its balance sheet.
3.Semi Inc.manufactures semiconductors.The company has just introduced its ninth new product and is the leader in market share for the industry.The company continues to invest in research and development and expand by purchasing competitors.The company has yet to pay dividends,but is considering it in the future.The company's largest current asset is cash,due to its high profit margin.

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Question 19

The receipt of cash when employees exercise stock options is a (an)____________________ activity.

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Question 20

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

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Quiz 3: Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows