Chapter 10 Statement of Cash Flow & Working Capital Analysis

Question 1

Examples of operating activities

Answer 1

Primary objectives of the business
Credit card and account receivables
Supplies
Inventory for resale
prepaid expenses
cost-of-sales items
employee costs
insurance costs
facilities support
interest
taxes
adjustments for noncash expenses (depreciation, gains/loss on sale of assets)
dividends received

Question 2

Examples of investing activities

Answer 2

transactions that affect noncurrent accounts
purchase or sale of a long-term asset
purchase or sale of a long-term noncash equivalent investment

Question 3

Examples of financing activities

Answer 3

transactions that cause changes to ownership equity and the payment or borrowing of long-term debt
issue of capital stock
dividends paid
lending and borrowing

Question 4

What is the difference between cash and cash flows?

Answer 4

cash is cash on hand and cash in the bank

cash flows is the change in cash on the balance sheet over a period of time

Question 5

What is working capital?

Answer 5

the excess of current assets compared to current liabilities to conduct sales revenue-generating activities

Question 6

What are inflows (sources) of working capital?

Answer 6

Income from operations
Accrual net income
Sale of long-term or other noncurrent assets
Increase in a long-term liability
The issuance of stock

Question 7

What are the outflows (uses) of working capital

Answer 7

loss from operations
purchase of a long-term or other noncurrent asset
payment of long-term liabilities
redemption of stock
payment of cash dividends