cash flows quiz 2 Flashcards
The statement of ____________ reports a company’s cash inflows and outflows for a period.
The statement of _________ provides useful information about a company’s ability to do the following:
1.
2.
3.
4.
cash flows
- Generate cash from operations
- Maintain and expand its operating capacity
- Meet its financial obligations
- Pay dividends
The statement of cash flows is used by ____________in evaluating past operations and in planning future investing and financing activities.
It is also used by ________ such as investors and creditors to assess a company’s profit potential and ability to pay its debt and pay dividends.
managers
external users
The statement of cash flows reports three types of cash flow activities as follows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
________________ are cash flows from transactions that affect the NET INCOME of the company.
Example: Purchase and sale of merchandise by a retailer.
Cash flows from operating activities
___________ are cash flows from transactions that affect investments in the NONCURRENT ASSETS of the company.
Example: Purchase and sale of fixed assets, such as equipment and buildings.
Cash flows from investing activities
__________ are cash flows from transactions that affect the DEBT and EQUITY of the company.
Example: Issuing or retiring equity and debt securities.
Cash flows from financing activities
The ending cash on the statement of cash flows equals
cash on the company’s balance sheet at the end of the year.
A source of cash causes the cash flow to increase and is called a ________.
A use of cash causes cash flow to decrease and is called __________
cash inflow
cash outflow
Cash flows from operating activities is the cash inflow or outflow from a company’s _____________
Companies may select one of two alternative methods for reporting cash flows from operating activities in the statement of cash flows:
1.
2.
day-to-day operations.
- The direct method
- The indirect method
The primary advantage of the direct method is that it …
Its primary disadvantage is that these data may not be __________ in the accounting records.
directly reports cash receipts and cash payments in the statement of cash flows.
readily available
The ___________ reports cash flows from operating activities by beginning with net income and adjusting it for revenues and expenses that do NOT involve the receipt or payment of cash
indirect method
