3.1 Cash Flow and Financial Statements

Question 1

What is a source of cash and a use of cash/application of cash

Answer 1

Source of Cash: Activity that generates cash

Use of Cash: Activity that spends cash

Question 2

Explain whether it is a source or use of cash when each side of the statement of financial position increases/decreases

Answer 2

A:
Increases - use of cash
Decreases - source of cash

L + OE:
Increase - source of cash
Decrease - use of cash

Question 3

Net Addition to Cash

Answer 3

Net Addition to Cash = Sources - Uses

Question 4

Define Statement of Cash Flows

Answer 4

A financial statement that summarizes a firm’s sources and uses of cash over a specified period

Question 5

In the statement of cash flows, all changes to cash flows are divided into 3 categories:

Answer 5

1. Operating Activities
2. Financing Activities
3. Investment Activities

Question 6

Example of Statement of Cash Flows

Answer 6