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Exam 10: Statement of Cash Flows

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Question 21

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Management should not use the statement of cash flows for which of the following purposes?

A) To determine dividend policy
B) To determine cash flow from operations
C) To determine cash flow from investing activities
D) To determine cash flow from financing activities
E) To determine the balance in accounts receivable

F) A) and C)
G) A) and D)

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Question 22

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The retirement of debt by the issuance of common stock should be presented in a statement of cash flows in which of the following sections?

A) Supplemental schedule of noncash investing and financing activities
B) Cash flows from operating activities
C) Cash flows from investing activities
D) Cash flows from financing activities
E) Supplemental schedule to reconcile net income to net cash provided by operations

F) None of the above
G) A) and B)

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Question 23

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Which of the following is not a purpose of the statement of cash flows?

Cash flow per share is usually higher than earnings per share.

Amortization of patents can be added to income in the operations section of the statement of cash flows because:

The operating cash flow/total debt ratio is one that indicates a firm's ability to meet its current maturities of debt.

Cash flow per share can be viewed as a substitute for earnings per share in terms of a firm's profitability.

Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000.What was the cash outflow for taxes?

Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000.What was the cash collected from customers?

Which of the following is not a typical cash flow under operating activities?

Depreciation expense reduces operating income but does not require the use of cash.

With the indirect method of presenting cash from operations, the income statement is essentially presented on a cash receipts and cash payments basis.

The statement of cash flows should be reviewed for several time periods in order to determine the major sources of cash and the major uses of cash.

Cash flow per share is a better indication of a firm's ability to make capital expenditure decisions and pay dividends than is earnings per share.

A cash outflow will be generated by an increase in a liability.

Which of the following should not be considered as part of "cash and cash equivalents"?

Working capital is considered to be one of the prime indicators of liquidity.

Which of the following transactions is not reflected in a statement of cash flows?

The operating cash flow/current maturities of long-term debt and current notes payable is a ratio that indicates long-term, debt-paying ability.