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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