Statement of cash flows exam review
This study set provides a comprehensive review of the statement of cash flows, covering key concepts, terminology, and practical examples relevant for a college-level economics and accounting course.
Quiz(36 domande)
1. What are cash flows from operating activities primarily derived from?
Termini in questo set(36)
Flashcards 1(18)
What is the statement of cash flows?
A financial report showing cash inflows and outflows over a period.
Name the three sections of the statement of cash flows.
- Operating Activities - Investing Activities - Financing Activities
True or False: Cash flows only include cash transactions.
True. Non-cash transactions are excluded.
Fill in the blank: Cash flow from __________ activities includes daily operations.
Operating
How do you calculate cash flow from operating activities?
Start with net income, adjust for non-cash items and changes in working capital.
What are investing activities?
Transactions involving the purchase or sale of long-term assets, like equipment.
Cause → Effect: Increase in accounts payable leads to __________.
Increase in cash flow from operations
What is free cash flow?
Cash generated after capital expenditures; indicates financial health. Formula: Cash from operations - CapEx.
True or False: Financing activities only involve debt.
False. They include equity transactions as well.
How is cash flow from investing calculated?
Subtract cash outflows for purchases from cash inflows from sales of investments.
Comparison: Operating vs. Financing cash flows.
Operating: Daily business activities. Financing: Sources of funding and debt repayments.
What does a negative cash flow indicate?
Potential liquidity issues, requiring careful management or financing.
Short example: Cash inflow from sale of equipment.
$5,000 cash received for old machinery.
Define capital expenditures (CapEx).
Funds used by a business to acquire or upgrade physical assets.
Fill in the blank: Cash flow from __________ activities may include dividends paid.
Financing
What is the purpose of the cash flow statement?
To provide insight into liquidity and financial viability over time.
True or False: Depreciation is added back to cash flow from operations.
True. It is a non-cash expense.
What is working capital?
Current assets minus current liabilities; indicates operational liquidity.
Flashcards 2(18)
What are operating activities?
Operating activities include cash transactions related to the core business operations, such as revenue from sales and payments to suppliers.
True or False: Investing activities involve cash flows from purchasing equipment.
True. Investing activities include cash flows from buying or selling long-term assets like machinery and property.
Fill in the blank: Cash flows from _________ activities reflect the company's financing decisions.
financing - Includes cash from issuing debt or equity, and repayments.
How do you calculate net cash provided by operating activities?
Start with net income, adjust for non-cash expenses, and changes in working capital.
List two examples of cash inflows from investing activities.
- Sale of property - Sale of investments
What is the purpose of the statement of cash flows?
To provide information about cash inflows and outflows, highlighting the liquidity of the business.
Cause → Effect: Depreciation expense increases.
→ Net cash from operating activities increases due to non-cash adjustment.
Comparison: Direct method vs. Indirect method.
Direct method lists cash inflows and outflows directly. Indirect method starts with net income and adjusts for non-cash items.
True or False: Financing activities include paying dividends.
True. Financing activities involve cash transactions related to equity and debt financing, including dividends.
What are cash equivalents?
Short-term investments that are easily convertible to cash, such as treasury bills and money market funds.
Give an example of a cash outflow from financing activities.
Repayment of long-term debt is a cash outflow from financing activities.
Define free cash flow.
Free cash flow is the cash available after capital expenditures. It's calculated as: .
What is a significant non-cash investing activity?
An example is acquiring assets through debt or stock issuance instead of cash.
How are cash flows from operations classified?
They are classified as either cash inflows or outflows based on the core business operations.
Fill in the blank: Cash flows from _______ activities include loan proceeds.
financing
Question: Why is the statement of cash flows important?
It helps assess liquidity, financial flexibility, and the ability to generate cash.
Short example: Calculate cash flow from operations.
Net income: 10,000, Working capital increase: $5,000. .
What does a decrease in accounts payable indicate?
It indicates a cash outflow, as the company is paying off its suppliers.
Domande in questo set(36)
1. What are cash flows from operating activities primarily derived from?
2. What type of activities does the operating section of the cash flow statement report?
3. Which of the following best describes investing activities?
4. Which of the following is NOT a component of cash flows from investing activities?
5. Fill in the blank: Cash flows from _________ activities involve issuing stock.
6. How is cash flow from financing activities primarily determined?
7. How do you determine net cash provided by operating activities using the indirect method?
8. What does an increase in accounts receivable indicate for cash flow?
9. Which of the following is NOT a cash inflow from investing activities?
10. Fill in the blank: Free cash flow is calculated as cash from operations minus __________.
11. What is the main function of the statement of cash flows?
12. True or False: A negative cash flow from investing activities always indicates poor financial health.
13. Cause → Effect: An increase in accounts receivable occurs. What is the likely effect on operating cash flow?
14. Which of the following activities would increase cash flow from financing?
15. Which method directly lists cash inflows and outflows in the statement of cash flows?
16. What is the primary purpose of the statement of cash flows?
17. True or False: Cash flows from financing activities include cash received from loans.
18. Which of the following actions would NOT be included in cash flow from financing activities?
19. Which of the following is an example of a cash outflow from financing activities?
20. What does a positive cash flow from operating activities indicate?
21. Define free cash flow.
22. How does depreciation affect cash flow from operations?
23. What is an example of a non-cash investing activity?
24. What is working capital?
25. How are cash flows from operations categorized?
26. Fill in the blank: Cash flows from __________ activities include receipts from selling long-term assets.
27. Fill in the blank: Cash flows from _______ activities include payments of principal on loans.
28. True or False: Changes in inventory levels can impact cash flow from operations.
29. Why is the statement of cash flows critical for investors?
30. What is typically the outcome of a company increasing its capital expenditures?
31. Short example: If net income is 15,000, and working capital decreases by $10,000, what is the cash flow from operations?
32. Which cash flow statement section includes cash received from customers?
33. What does a decrease in accounts payable signify?
34. Which of the following statements is true regarding cash flow statements?
35. Which of the following describes the purpose of free cash flow?
36. What does the cash flow from financing activities include?
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