What is the primary purpose of the statement of cash flows?
a) To show the profitability of a company
b) To show the cash inflows and outflows of a company
c) To calculate the net income of a company
d) To calculate the total liabilities of a company
Which of the following sections is NOT part of the statement of cash flows?
a) Operating activities
b) Investing activities
c) Financing activities
d) Shareholders’ equity activities
What type of activity is the purchase of equipment classified under in the statement of cash flows?
a) Operating activity
b) Investing activity
c) Financing activity
d) Non-cash activity
In the indirect method, which of the following adjustments is made to net income?
a) Depreciation expense is subtracted
b) A decrease in accounts payable is added
c) A decrease in accounts receivable is subtracted
d) A gain on the sale of assets is added back
Which of the following is NOT considered a financing activity?
a) Issuance of common stock
b) Payment of dividends
c) Borrowing money
d) Sale of property and equipment
Which of the following is a cash inflow from operating activities?
a) Repayment of loans
b) Sale of equipment
c) Collection of customer receivables
d) Issuance of stock
Which of the following cash flows is reported under investing activities?
a) Issuance of bonds
b) Purchase of a building
c) Payments of dividends
d) Repayment of loans
Which of the following is classified as a financing activity in the statement of cash flows?
a) Purchase of inventory
b) Payment of interest
c) Payment of dividends
d) Sale of long-term investments
The indirect method starts with net income and adjusts for changes in which of the following?
a) Cash equivalents
b) Non-cash items and changes in working capital
c) Operating expenses
d) Net sales revenue
Which of the following would be classified as a non-cash investing and financing activity?
a) Payment of long-term debt
b) Purchase of land with cash
c) Issuance of stock for the acquisition of a company
d) Depreciation expense
Which of the following would be included in cash flows from operating activities?
a) Payment for interest on debt
b) Sale of a long-term asset
c) Borrowing from a bank
d) Purchase of shares in another company
What is the main difference between the direct and indirect methods of presenting cash flows from operating activities?
a) The direct method reports cash flows related to financing activities, while the indirect method does not
b) The direct method calculates net income, while the indirect method starts with cash inflows
c) The direct method presents the actual cash inflows and outflows, while the indirect method adjusts net income for non-cash items
d) There is no difference between the two methods
Which of the following is added back to net income in the indirect method of calculating cash flows?
a) A decrease in accounts receivable
b) A gain on the sale of a fixed asset
c) A decrease in inventory
d) Depreciation expense
Which of the following activities is reported as a cash inflow from financing activities?
a) Issuing bonds
b) Selling equipment
c) Paying interest
d) Paying wages
Cash received from customers is classified under which section of the statement of cash flows?
a) Financing activities
b) Investing activities
c) Operating activities
d) Non-cash activities
In the statement of cash flows, how is the purchase of property, plant, and equipment classified?
a) Operating activity
b) Investing activity
c) Financing activity
d) Non-cash activity
Which of the following would result in an increase in cash in the statement of cash flows?
a) An increase in accounts payable
b) An increase in accounts receivable
c) An increase in inventory
d) A decrease in accrued expenses
Which of the following is true regarding the indirect method?
a) It directly lists cash inflows and outflows from operating activities
b) It starts with cash balances and works backward to net income
c) It adjusts net income by removing non-cash items and changes in working capital
d) It includes only the cash from financing activities
Which section of the statement of cash flows would show the repayment of a loan?
a) Operating activities
b) Investing activities
c) Financing activities
d) Non-cash activities
Which of the following is considered a cash flow from investing activities?
a) Receiving interest on bonds
b) Issuing common stock
c) Paying off long-term debt
d) Purchasing a new office building
Under the direct method, cash payments to suppliers are subtracted from:
a) Sales revenue
b) Operating income
c) Net income
d) Cash received from customers
Which of the following would be classified under cash flows from financing activities?
a) Payment of wages
b) Sale of property
c) Borrowing money
d) Purchase of inventory
What does the statement of cash flows provide information about?
a) The company’s long-term profitability
b) The company’s financial position at a specific point in time
c) The company’s cash inflows and outflows during a period
d) The company’s gross revenue from sales
Which of the following items would be excluded from the statement of cash flows?
a) The issuance of stock in exchange for assets
b) Depreciation expense
c) Payment of dividends
d) Sale of fixed assets
What is the impact of a decrease in accounts receivable on the cash flow statement?
a) It increases cash from operating activities
b) It decreases cash from operating activities
c) It has no impact on cash flow
d) It is classified under investing activities
Which of the following adjustments is made to net income in the indirect method when calculating operating cash flows?
a) A decrease in accounts payable is added back
b) Depreciation is subtracted
c) Gains on the sale of assets are subtracted
d) A decrease in inventory is subtracted
Which of the following is a cash outflow under operating activities?
a) Payment of wages
b) Borrowing from a bank
c) Issuing stock
d) Selling equipment
How is the collection of a loan classified in the statement of cash flows?
a) Operating activity
b) Financing activity
c) Investing activity
d) Non-cash activity
