Question 1

The cash flow on total assets ratio is calculated by:
A)Dividing cash flows from operations by average total assets.
B)Dividing total cash flows by average total assets.
C)Dividing average total assets by cash flows from investing activities.
D)Dividing average total assets by total cash flows.
E)Total cash flows divided by average total assets times 365.

Accepted Answer

The cash flow on total assets ratio is calculated by dividing cash flows from operations by average total assets. This ratio is used to evaluate a company's ability to generate cash from its operating activities relative to the size of its asset base.

Question 2

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash financing and investing activities.
E)Reconciliation of cash balance.

Accepted Answer

The purchase of long-term assets by issuing a note payable is a noncash transaction that does not affect the cash flow directly. Therefore, it is reported in the schedule of noncash financing and investing activities on the statement of cash flows.

Question 3

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:
A)Historical cost principle.
B)Materiality principle.
C)Full disclosure principle.
D)Going concern principle.
E)Business entity principle.

Accepted Answer

The full disclosure principle requires that all important information related to financial statements be disclosed. Therefore, noncash financing and investing activities should be disclosed on the statement of cash flows or in a footnote to ensure full disclosure.

Question 4

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n):
A)Operating activity.
B)Investing activity.
C)Financing activity.
D)Noncash investing and financing activity.
E)None of these.This is not reported in the statement of cash flows.

Accepted Answer

Interest paid on a loan is considered an operating activity because it relates to the cost of borrowing funds, which is part of the company's regular business operations.

Question 5

Noncash investing and financing activities may be disclosed in:
A)A note in the financial statements or a schedule attached to the statement of cash flows.
B)The operating activities section of the statement of cash flows.
C)The investing activities section of the statement of cash flows.
D)The financing activities section of the statement of cash flows.
E)The reconciliation of cash balance section.

Accepted Answer

Noncash investing and financing activities may be disclosed in a note in the financial statements or a schedule attached to the statement of cash flows. This is because such activities do not directly affect cash flows and therefore cannot be reported in the operating, investing, or financing activities sections of the statement of cash flows. Instead, they are typically disclosed separately in the form of a note or schedule.

Question 6

Which one of the following is representative of typical cash flows from operating activities?
A)Proceeds from collecting the principal amounts of loans.
B)Repayment of principals on loans.
C)Proceeds from the issuance of bonds and notes payable.
D)Payments by a merchandiser to acquire equity securities of other companies.
E)Receipts of cash sales.

Accepted Answer

Receipts of cash sales are representative of typical cash flows from operating activities as they are related to the primary business of the company and represent cash generated from the sale of goods or services. The other options are related to financing activities (issuance and repayment of debt) or investing activities (purchase of equity securities), which are not representative of typical cash flows from operating activities.

Question 7

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash investing or financing activity.
E)Reconciliation of cash balance.

Accepted Answer

The answer of The appropriate section in the statement of...

Question 8

The statement of cash flows helps address questions such as
A)How is the increase in investments financed?
B)What is the source of cash for new plant assets?
C)How much cash is generated from or used in operations?
D)Why is cash flow from operations different from income?
E)The statement of cash flows helps to address all of the questions listed.

Accepted Answer

The statement of cash flows helps address all of the questions listed, including how investments are financed, the source of cash for new plant assets, how much cash is generated from or used in operations, and why cash flow from operations is different from income. This statement provides a comprehensive view of cash movements within a business, aiding in making informed business decisions.

Question 9

Accounting standards:
A)Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset.
B)Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities.
C)Require that companies include a statement of cash flows in a complete set of financial statements.
D)Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets.
E)Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities.

Accepted Answer

Accounting standards require that companies include a statement of cash flows in a complete set of financial statements. There are no exceptions for omitting the statement of cash flows based on insignificant cash balances or lack of investing or financing activities.

Question 10

The statement of cash flows helps analysts evaluate the:
A)Source of cash used for debt repayments.
B)Source of cash used for plant expansion.
C)Differences between net income and net operating cash flow.
D)Source of cash used to finance investing activities.
E)All of the choices are correct.

Accepted Answer

The statement of cash flows provides information on all sources and uses of cash, including debt repayments, plant expansion, differences between net income and net operating cash flow, and financing of investing activities. Therefore, all the given choices are correct.

Question 11

The cash flow on total assets ratio:
A)Is the same as return on assets.
B)Is the same as profit margin.
C)Can be an indicator of earnings quality.
D)Is highly affected by accounting principles of income recognition and measurement.
E)Is average net assets divided by cash flows from operations.

Accepted Answer

The cash flow on total assets ratio is a measure of a company's ability to generate cash flow from its total assets, which can be an indicator of the quality of a company's earnings. This ratio is less affected by accounting principles than other ratios such as return on assets and profit margin. Therefore, the correct choice is C.

Question 12

A company had average total assets of $1,760,000,total cash flows of $1,320,000,cash flows from operations of $205,000,and cash flows from financing of $850,000.The cash flow on total assets ratio equals:
A)1.33%.
B)8.58%.
C)11.65%.
D)15.5%.
E)75%.

Accepted Answer

Cash Flow on Total Assets Ratio = Cash Flows from Operations/Average Total Assets
Cash Flow on Total Assets Ratio = $205,000/$1,760,000 = 11.65%

Question 13

A company had net cash flows from operations of $120,000,cash flows from financing of $330,000,total cash flows of $500,000,and average total assets of $2,500,000.The cash flow on total assets ratio equals:
A)4.8%.
B)5.0%.
C)20.0%.
D)20.8%.
E)24.0%.

Accepted Answer

Cash Flow on Total Assets Ratio = Cash Flows from Operations/Average Total Assets
Cash Flow on Total Assets Ratio = $120,000/$2,500,000 = 4.8%

Question 14

Cash flows from interest received on loans are reported in the statement of cash flows as part of:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Noncash activities.
E)None of these.This is not reported in the statement of cash flows.

Accepted Answer

Interest received on loans is considered a cash inflow from operating activities because it is part of the normal course of business for a lending institution.

Question 15

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:
A)Operating activities.
B)Investing activities.
C)Financing activities.
D)Direct activities.
E)Indirect activities.

Accepted Answer

Cash flows related to borrowing money and repaying debt fall under financing activities, which involve changes in the company's capital structure and stockholder equity, such as issuing or repurchasing stocks, paying dividends, or taking on or repaying debt.

Question 16

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Noncash activities.
E)None of these.This is not reported in the statement of cash flows.

Accepted Answer

Cash flows from selling trading securities are considered part of operating activities because they are part of the company's primary revenue-generating activities.

Question 17

Typical cash flows from investing activities include each of the following except:
A)Payments to purchase property, plant and equipment or other productive assets (excluding inventory).
B)Proceeds from collecting the principal amount of notes receivable arising from customer sales.
C)Proceeds from collecting the principal amount of notes receivable arising from intercompany transactions.
D)Payments to acquire held-to maturity securities of other entities, except cash equivalents.
E)Proceeds from the sale of equipment.

Accepted Answer

Proceeds from collecting the principal amount of notes receivable arising from customer sales are typically considered cash flows from operating activities, not investing activities.

Question 18

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?
A)Interest revenue.
B)Sale of equipment.
C)Interest expense.
D)Purchase of treasury stock.
E)Purchase of stock in another company.

Accepted Answer

The answer of Which of the following is included in...

Question 19

An example of a transaction that must be disclosed as a noncash investing and financing activity includes:
A)The retirement of debt by issuance of equity.
B)The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance.
C)The leasing of assets in a transaction that qualifies as a capital lease.
D)The purchase of noncash assets in exchange for equity or debt securities.
E)All of the choices are examples of noncash investing and financial activities.

Accepted Answer

All the choices provided are examples of noncash investing and financing activities, as they involve significant financial transactions that do not involve cash flows.

Question 20

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash investing or financing activity.
E)None of these.This is not reported on the statement of cash flows.

Accepted Answer

Cash dividends received from investments in securities are reported under operating activities in the statement of cash flows, as they are considered part of the company's operating income.

Quiz 16: Reporting the Statement of Cash Flows

The cash flow on total assets ratio is calculated by:

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n) :

Noncash investing and financing activities may be disclosed in:

Which one of the following is representative of typical cash flows from operating activities?

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

The statement of cash flows helps address questions such as

Accounting standards:

The statement of cash flows helps analysts evaluate the:

The cash flow on total assets ratio:

A company had average total assets of $1,760,000,total cash flows of $1,320,000,cash flows from operations of $205,000,and cash flows from financing of $850,000.The cash flow on total assets ratio equals:

A company had net cash flows from operations of $120,000,cash flows from financing of $330,000,total cash flows of $500,000,and average total assets of $2,500,000.The cash flow on total assets ratio equals:

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

Typical cash flows from investing activities include each of the following except:

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

An example of a transaction that must be disclosed as a noncash investing and financing activity includes:

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is: