Ch. 6 (IFSA) Summary

Question 1

___ are classified into three categories: operating activities, investing activities, and financing activities. Significant noncash transaction activities (if present) are reported by using a supplemental disclosure note to the cash flow statement.

Answer 1

Cash flow activities

Question 2

Cash flow activities are classified into three categories: ___, investing activities, and financing activities. Significant noncash transaction activities (if present) are reported by using a supplemental disclosure note to the cash flow statement.

Answer 2

operating activities

Question 3

Cash flow activities are classified into three categories: operating activities, ___, and financing activities. Significant noncash transaction activities (if present) are reported by using a supplemental disclosure note to the cash flow statement.

Answer 3

investing activities

Question 4

Cash flow activities are classified into three categories: operating activities, investing activities, and ___. Significant noncash transaction activities (if present) are reported by using a supplemental disclosure note to the cash flow statement.

Answer 4

financing activities

Question 5

Cash flow activities are classified into three categories: operating activities, investing activities, and financing activities. Significant ___ are reported by using a supplemental disclosure note to the cash flow statement.

Answer 5

noncash transaction activities (if present)

Question 6

Cash flow activities are classified into three categories: operating activities, investing activities, and financing activities. Significant noncash transaction activities (if present) are reported by using ___.

Answer 6

a supplemental disclosure note to the cash flow statement

Question 7

The cash flow statement under IFRS is similar to U.S. GAAP; however, ___ permits greater discretion in classifying some cash flow items as operating, investing, or financing activities.

Answer 7

IFRS

Question 8

The cash flow statement under IFRS is similar to U.S. GAAP; however, IFRS permits greater discretion in classifying some cash flow items as ___, investing, or financing activities.

Answer 8

operating

Question 9

The cash flow statement under IFRS is similar to U.S. GAAP; however, IFRS permits greater discretion in classifying some cash flow items as operating, ___, or financing activities.

Answer 9

investing

Question 10

The cash flow statement under IFRS is similar to U.S. GAAP; however, IFRS permits greater discretion in classifying some cash flow items as operating, investing, or ___ activities.

Answer 10

financing

Question 11

Companies can use either ___ for reporting their operating cash flow.

Answer 11

the direct or the indirect method

Question 12

Companies can use either the direct or the indirect method for reporting their ___.

Answer 12

operating cash flow

Question 13

___ discloses operating cash inflows by source (e.g., cash received from customers, cash received from investment income) and operating cash outflows by use (e.g., cash paid to suppliers, cash paid for interest) in the operating activities section of the cash flow statement.

Answer 13

The direct method

Question 14

The direct method discloses ___ by source (e.g., cash received from customers, cash received from investment income) and operating cash outflows by use (e.g., cash paid to suppliers, cash paid for interest) in the operating activities section of the cash flow statement.

Answer 14

operating cash inflows

Question 15

The direct method discloses operating cash inflows by ___ and operating cash outflows by use (e.g., cash paid to suppliers, cash paid for interest) in the operating activities section of the cash flow statement.

Answer 15

source (e.g., cash received from customers, cash received from investment income)

Question 16

The direct method discloses operating cash inflows by source (e.g., cash received from customers, cash received from investment income) and ___ by use (e.g., cash paid to suppliers, cash paid for interest) in the operating activities section of the cash flow statement.

Answer 16

operating cash outflows

Question 17

The direct method discloses operating cash inflows by source (e.g., cash received from customers, cash received from investment income) and operating cash outflows by ___ in the operating activities section of the cash flow statement.

Answer 17

use (e.g., cash paid to suppliers, cash paid for interest)

Question 18

The direct method discloses operating cash inflows by source (e.g., cash received from customers, cash received from investment income) and operating cash outflows by use (e.g., cash paid to suppliers, cash paid for interest) in ___ of the cash flow statement.

Answer 18

the operating activities section

Question 19

___ reconciles net income to net cash flow from operating activities by adjusting net income for all noncash items and the net changes in the operating working capital accounts.

Answer 19

The indirect method

Question 20

The indirect method reconciles ___ to net cash flow from operating activities by adjusting net income for all noncash items and the net changes in the operating working capital accounts.

Answer 20

net income

Question 21

The indirect method reconciles net income to ___ from operating activities by adjusting net income for all noncash items and the net changes in the operating working capital accounts.

Answer 21

net cash flow

Question 22

The indirect method reconciles net income to net cash flow from ___ by adjusting net income for all noncash items and the net changes in the operating working capital accounts.

Answer 22

operating activities

Question 23

The indirect method reconciles net income to net cash flow from operating activities by adjusting ___ for all noncash items and the net changes in the operating working capital accounts.

Answer 23

net income

Question 24

The indirect method reconciles net income to net cash flow from operating activities by adjusting net income for all ___ and the net changes in the operating working capital accounts.

Answer 24

noncash items

Question 25

The indirect method reconciles net income to net cash flow from operating activities by adjusting net income for all noncash items and ___ in the operating working capital accounts.

Answer 25

the net changes

Question 26

The indirect method reconciles net income to net cash flow from operating activities by adjusting net income for all noncash items and the net changes in ___.

Answer 26

the operating working capital accounts

Question 27

___ is linked to a company’s income statement and comparative balance sheets and is constructed from the data on those statements.

Answer 27

The cash flow statement

Question 28

The cash flow statement is linked to a company’s ___ and comparative balance sheets and is constructed from the data on those statements.

Answer 28

income statement

Question 29

The cash flow statement is linked to a company’s income statement and ___ and is constructed from the data on those statements.

Answer 29

comparative balance sheets

Question 30

The cash flow statement is linked to a company’s income statement and comparative balance sheets and is constructed from the data on ___.

Answer 30

those statements

Question 31

Although ___ is most commonly used by companies, the analyst can generally convert it to the direct format by following a simple three-step process.

Answer 31

the indirect method

Question 32

Although the indirect method is most commonly used by companies, the analyst can generally convert it to ___ by following a simple three-step process.

Answer 32

the direct format

Question 33

Although the indirect method is most commonly used by companies, the analyst can generally convert it to the direct format by following a simple ___.

Answer 33

three-step process

Question 34

The analyst can use ___ for the cash flow statement. Two prescribed approaches are the total cash inflows/total cash outflows method and the percentage of net revenues method.

Answer 34

common-size statement analysis

Question 35

The analyst can use common-size statement analysis for the cash flow statement. Two prescribed approaches are ___ and the percentage of net revenues method.

Answer 35

the total cash inflows/total cash outflows method

Question 36

The analyst can use common-size statement analysis for the cash flow statement. Two prescribed approaches are the total cash inflows/total cash outflows method and ___.

Answer 36

the percentage of net revenues method

Question 37

___ can be used to determine FCFF and FCFE.

Answer 37

The cash flow statement

Question 38

The cash flow statement can be used to determine ___ and FCFE.

Answer 38

FCFF

Question 39

The cash flow statement can be used to determine FCFF and ___.

Answer 39

FCFE

Question 40

___ may also be used in financial ratios measuring a company’s profitability, performance, and financial strength.

Answer 40

The cash flow statement

Question 41

The cash flow statement may also be used in ___ measuring a company’s profitability, performance, and financial strength.

Answer 41

financial ratios