12

Question 1

What is deducted from the trade receivables account before it is shown on the Statement of Financial Position?

Answer 1

allowance for doubtful accounts

Question 2

cash flow from operating activities

Answer 2

Profit
+ deductions with no cash outlay (eg. amortization)
- additions not received in cash (eg. profit share of associates)
+ change in net working capital

Question 3

free cash flow

Answer 3

(cash flow from operating activities - capex)

Capex is found in ‘cash flow from investing activities’ in company’s cash flow statement

Question 4

statement of cash flows: Financing Activities

Answer 4

share issuances
long-term debt issues
long-term debt repayments
changes in term bank loans
dividends to shareholders

Question 5

statement of cash flows: Investing Activities

Answer 5

expenditures on PPE and intangible assets
proceeds on asset disposals
dividends from associates
purchase/sale of investments

Question 6

statement of cash flows: Operating Activities

Answer 6

profit
+ deductions with no cash outlay (eg. amortization)
- additions not received in cash (eg. profit share of associates)
+ change in net working capital

Question 7

right

Answer 7

option to shareholder to acquire additional shares in proportion to number of shares owned.
shares are available up to expiration date at subscription price (aka offering price) usually lower than market price of shares at time of rights issue.

Question 8

why raise capital through a rights offering

Answer 8

markets aren’t open for ordinary common share issue

co. wants existing shareholders to: (1) maintain proportionate holdings (2) acquire additional shares before anyone else