The statement of cash flows provides answers to all of the following questions except
what is the impact of inflation on the cash balance at the end of the year?
If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?
It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
Cash purchase of treasury stock.
Making and collecting loans and disposing of property, plant, and equipment are
investing activities.
In preparing a statement of cash flows, cash flows from operating activities
can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.
Free cash flow is calculated as net cash provided by operating activities less
capital expenditures and dividends.
Lohmeyer Corporation reports:
Cash provided by operating activities: $ 320,000
Cash used by investing activities: 110,000
Cash provided by financing activities: 140,000
Beginning cash balance: 70,000
What is Lohmeyer's ending cash balance?
420,000
Sauder Corporation reports the following information:
Net income $320,000
Depreciation expense 70,000
Increase in accounts receivable 30,000
Sauder should report cash provided by operating activities of
360,000
Huge Cart Inc. gives you the following information pertaining to the year 2014.
Net sales
$ 800,000
Cost of goods sold
500,000
Current assets
500,000
Current liabilities
250,000
Average total assets
900,000
Total liabilities
550,000
Net income
150,000
The
.89
In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from
investing activities
asset turnover ratio formula:
net sales/average total assets
Which of the following statements about the statement of financial position is incorrect?
It reports the assets, liabilities, and equity of a company for a period of time.
Major limitations of the statement of financial position include all of the following except:
only amounts known with certainty are reported.
Current assets are generally presented in the statement of financial position in the following order:
cash, short term investments, receivables, inventories, prepaid expenses
Which of the following investments should always be reported as current assets?
Trading securities.
Current liabilities include:
accrued warranty costs.
advances received from customers.
current portion of long-term debt.
Which of the following are equity sections:
share premium.
share capital.
retained earnings.
The statement of financial position format listing liabilities and equity directly below assets is called the:
report form
The primary purpose of a statement of cash flows is to report the:
relevant information about the cash receipts and cash payments during a period.
Activities that involve the cash effects of transactions entering into the determination of net income are classified as:
operating activities
The last step in preparing the statement of cash flows is to:
reconcile the change in cash with the beginning and the ending cash balances.
The cash debt coverage ratio is computed by dividing net cash provided by operating activities by:
average total liabilities
Free cash flow is calculated as net cash provided by operating activities less:
capital expenditures and dividends
Companies are not required to disclose information about:
the identity of all shareholders
Which of the following is an acceptable disclosure technique for financial statements?
Contra items.
Cross reverences.
Parenthetical explanations.
The major types of ratios include all of the following, except:
solvency ratios
The statement of financial position is sometimes referred to as the:
balance sheet.
Solvency refers to the:
ability to pay debts as they mature
Cash is generally listed _________ in the current assets section of the statement of financial position.
last
The statement of cash flows is divided into _______ different activities.
three
The current cash debt coverage ratio is equal to net cash provided by operating activities � average _________ _____________.
average liabilities
The statement of cash flows is prepared:
for a period of time
Companies use estimates in __________ items on the statement of financial position.
valuing
A liability that is payable within the next year is sometimes included in ________-__________ liabilities.
non current
The excess of total ________ assets over total _________ liabilities is referred to a net working capital.
current
___________ activities on the statement of cash flows include the issuance of debt and equity securities.
financing
The use of the term "reserve" is ________________ in U.S. GAAP.
discouraged
The ___________ section comes after the equity section on the statement of financial position.
liabilities
Which of the following types of analysis uses the statement of financial position the least?
profitability
Assets can be divided into how many subclassifications, and what are they?
5
long-term investments, PP & E, intangibles, other assets, and current assets
Which of the following is not one of the portfolio groupings for investments in debt and equity securities?
investments
Which of the following types of securities do not include equity securities?
held-to-maturity
Which of the following current assets should be reported at lower of cost or net realizable value?
inventory
Which of the following is not an intangible asset?
wasting resources
Cash and cash equivalents should be reported on the statement of financial position at
fair value
Issuance of share capital would come under which activity on the statement of cash flows?
financing
Payment of a cash dividend would be reported as a cash outflow in which of the following sections:
financing activities
Which of the following would be added back to net income in the operating activities section of the statement of cash flows?
increase in accounts payable
Which of the following would be a cash inflow in the investing section of the statement of cash flows?
proceeds from the sale of equipment
Which of the following would be a cash outflow in the financing section of the statement of cash flows?
payment of a cash dividend
The cash account balance is reported on the
statement of financial position and statement of cash flows
Non-controlling interest goes under what section of the accounting equation?
stockholders' equity
the balance sheet helps with predicting:
the amounts, timing, and uncertainty of future cash flows
analysts use the balance sheet to assess a company's
liquidity, solvency, and financial flexibility
liquidity is the amount of time that is expected to lapse until:
an asset is realized or otherwise converted into cash or until a liability has to be paid
solvency refers to the company's ability to:
pay its debts as the mature
two factors that affect a company's financial flexibility:
solvency and liquidity
financial flexibility refers to:
the ability of a company to take effective actions to alter the amounts and timing of cash flows os it can respond to unexpected needs and opportunities
assets and liabilities are recorded at:
historical cost
subsections of assets on the balance sheet (in order of liquidity):
current assets, long term investments, property plant and equipment, intangible assets, and other assets
subsections of liabilities and stockholders' equity on the balance sheet (in order of liquidity):
current liabilities, long-term debt, and owners' stockholders' equity
how are cash and cash equivalents valued?
fair value
how are short-term investments valued?
fair value generally
how are receivables valued?
estimated amount collectible
how are inventories valued?
lower-of-cost-or-market
how are prepaid expenses valued?
cost
if cash is set aside to pay obligations that are meant to be paid in over a year, on the balance sheet, the cash reported would include:
all the cash besides the cash held aside
cash = ______________ + ________________
currency and demand deposits
cash equivalents are:
short term, highly liquid investments that will mature within 3 months or less
Three separate classifications of short-term investments:
available-for-sale, trading, and held-to-maturity
which type of short term investments should always be recorded as current assets?
trading
Available for sale securities are those that are:
not classified as trading nor held-to-maturity
trading and available for sale securities are reported at:
fair value
on the balance sheet, what two classifications regarding inventories should be included?
basis of valuation and cost flow assumption
prepaid expenses are considered to be current assets because had they not been purchased:
they would require the used of cash during the next year or operating cycle
securities are classified as long term investment because:
the company isn't intending to convert them into cash in the short term
intangible assets lack __________ _____________ and they are not ______________ _________________.
physical substance;financial instruments
limited life of intangibles are:
amortized
if a liability is payable within the year, but is not classified as a short term liability, it means that the company intends to:
1. refinance the debt via a long-term debt issuance
2. retire the debt out of non-current assets
working capital:
excess of total current assets over total current liabilities
working capital represents the:
net amount of a company's relatively liquid resources
companies classify long-term liabilities that mature within the current operating cycle as current liabilities if:
payment of the obligation requires the use of current assets
any premium or discount is to be reported separately as an addition or subtraction from:
bonds payable
What are the six subsections of stockholders' equity?
1. capital stock
2. Additional paid in capital
3. retained earnings
4. accumulated other comprehensive income
5. treasury stock
6. non-controlling interest
the presentation of the balance sheet meets the:
object of financial reporting
primary purpose of the statement of cash flows is to provide ____________ _____________ about the cash _________ and cash ___________ of an enterprise during a period.
relevant information; receipts; payments
four steps in preparing the statement of cash flows
1. determine the net cash provided by (or used in ) operating activities
2. determine the net cash provided by (or used in ) investing activities
3. determine the net cash provided by (or used in ) financing activities
4. Reconcile the change in cash with
current cash debt coverage
net cash provided by operating activities/average current liabilities
cash debt coverage
net cash provided by operating activities/cash debt coverage
free cash flow:
net cash provided by operating activities - capital expenditures - dividends
difference between indirect and direct method of cash flow statement:
direct method- operating activities include all revenues and expenses (in their natural flow in computation of net income)
indirect method- reconcile things to net income