Chapter 12: Statement of Cash Flows

15 December 2022
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question
Identify the type of activity that includes lending money and collecting on the loans. a) investing activities b) financing activities c) noncash investing and financing activities d) operating activities
answer
a) investing activities
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Which of the following is associated with financing activities? a) lending money b) acquiring long-lived assets c) issuing debt d) acquiring investments
answer
c) issuing debt
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In general, which of the following is considered the MOST important category on the statement of cash flows? a) cash flows from investing activities b) cash flows from significant noncash activities c) cash flows from financing activities d) cash flows from operating activities
answer
d) cash flows from operating activities
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On the statement of cash flows, how are cash receipts from interest and dividends classified? a) as operating activities b) as financing activities c) as significant noncash activities d) as investing activities
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a) as operating activities
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Where is a conversion of bonds into common stock reported on a statement of cash flows? a) in the significant noncash activities b) in the stockholders' equity section c) in the extraordinary section d) in the financing section
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a) in the significant noncash activities
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An example of a noncash transaction that is not reported in the body of a statement of cash flows is: a) repaying money previously borrowed b) delivering payment for equipment c) acquiring land by issuing common stock d) obtaining capital from owners
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c) acquiring land by issuing common stock
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What can be determined by converting net income from an accrual basis to a cash basis under either the direct or the indirect method? a) net cash provided by operating activities b) operating expenses c) gross sales revenue d) net cash provided by goods sold
answer
a) net cash provided by operating activities
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What is the result of an increase in accounts payable during a period? a) expenses on an accrual basis are the same expenses on a cash basis b) expenses on an accrual basis are greater than expenses on a cash basis c) expenses on an accrual basis are less than expenses on a cash basis d) revenues on an accrual basis are less than revenues on a cash basis
answer
b) expenses on an accrual basis are greater than expenses on a cash basis
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____ causes a change in cash during a period. a) declaration of a cash dividend b) payment of an accounts payable c) recording depreciation expense d) accrual of an expense
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b) payment of an accounts payable
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The ____ method adjusts net income to find net cash provided by operating activities. a) direct b) cost-benefit c) working capital d) indirect
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d) indirect
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Which component of net income does not affect cash flow? a) purchase of inventory b) depreciation on plant assets c) issuance of notes payable d) payment of cash dividends
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b) depreciation on plant assets
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If a company uses the indirect method to depict cash flows, where, if at all, would accounts receivable collected be classified on the statement of cash flows? a) investing activities section b) financing activities section c) operating activities section d) noncash activities
answer
c) operating activities section
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What is the result of an increase in accounts payable during a period? a) expenses on an accrual basis are less than expenses on a cash basis b) expenses on an accrual basis are the same as expenses on a cash basis c) expenses on an accrual basis are greater than expenses on a cash basis d) revenues on an accrual basis are less than revenues on a cash basis
answer
c) expenses on an accrual basis are greater than expenses on a cash basis
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____ causes a change in cash during a period. a) declaration of a cash dividend b) recording depreciation expenses c) write-off of an uncollectible account receivable d) payment of an accounts payable
answer
d) payment of an accounts payable
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Which of the following describes free cash flow? a) cash provided by investing activities less capital expenditures b) cash provided by operations less cash dividends c) cash provided by operations less capital expenditures and cash dividends d) cash provided by investing activities less capital expenditures and cash dividends
answer
c) cash provided by operations less capital expenditures and cash dividends
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Which of the following describes cash provided by operations less capital expenditures and cash dividends? a) adjusted cash flow b) indirect cash flow c) direct cash flow d) free cash flow
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d) free cash flow
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Which of the following statements about free cash flow is true? a) significant free cash flow indicates less potential to pay additional dividends b) free cash flow is not reported on the statement of cash flows c) free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends d) significant free cash flow indicates less potential to finance new investments
answer
b) free cash flow is not reported on the statement of cash flows
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Which of the following describes free cash flow? a) cash provided by operations less capital expenditures and cash dividends b) cash provided by investing activities less capital expenditures and cash dividends c) cash provided by operations less cash dividends d) cash provided by investing activities less capital expenditures
answer
a) cash provided by operations less capital expenditures and cash dividends
question
Which of the following statements about free cash flow is true? a) significant free cash flow indicates less potential to finance new investments b) free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends c) significant free cash flow indicates less potential to pay additional dividends d) free cash flow is not reported on the statement of cash flows
answer
d) free cash flow is not reported on the statement of cash flows
question
Blackstone Company has the following information available: Net income, $20,000; Cash provided by operating activities, $30,000; Cash sales, $75,000; Capital expenditures, $12,000; and Cash dividends, $6,000. What is Blackstone's free cash flow? a) $48,000 b) $27,000 c) $2,000 d) $12,000
answer
d) $12,000
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Because cash flows are not accurately reflected in accrual accounting, many business analysts use ____ to evaluate companies. a) net income-based ratios b) free cash flows c) net cash provided by operating activities d) cash-based ratios
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d) cash-based ratios
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Free cash flow is the net cash provided by operating activities after adjusting for dividends paid and a) net sales b) solvency c) earning power d) capital expenditures
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d) capital expenditures