Chapter 12 - Cash Flows

Question 0

CFI cash outflow items

Answer 0

cash paid for:

1) purchase of property, plant and equipment
2) purchases of investments and securites

Question 1

Cash Equivalent

Answer 1

A short term, highly liquid investment with an original maturity of less than 3 months

Question 2

CFI cash inflow items

Answer 2

cash received from:

1) Sale or disposal of property, plant and equipment
2) Sale or maturity of investments in securites

Question 3

CFF cash inflow items

Answer 3

cash paid for:

1) borrowing on notes, mortgages, bonds. etc. from creditors
2) issuing stock to owners

Question 4

CFF cash outflow items

Answer 4

cash paid for:

1) repayment of principal to creditors (EXCLUDING INTEREST)
2) repurchasing stock from owners
3) dividends to owners

Question 5

The difference between cash inflows and outflows for investing activities is called:

Answer 5

NCFI: net cash inflow (outflow) from investing activities:

Question 6

CFO cash inflow items

Answer 6

cash received from:

1) customers
2) dividends and interest on investments

Question 7

CFO cash outflow items

Answer 7

cash paid for:

1) purchase of services (electricity, etc.) and goods for resale
2) salaries and wages
3) income taxes
4) interest on liabilities

Question 8

The difference between cash inflows and outflows for operating activities is called

Answer 8

NCFO: net cash inflow (outflow) from operating activites

Question 9

The difference between cash inflows and outflows for financing activities is called

Answer 9

NCFF: net cash inflow (outflow) from financing activites

Question 10

What cash flow type do cash inflows from dividends and interest on investments fall under?

Answer 10

CFO

Question 11

What cash flow type to cash inflows from sales of investments fall under?

Answer 11

CFI

Question 12

What cash flow type do cash outflows from payment of interest on a loan fall under?

Answer 12

CFO

Question 13

What cash flow type to cash inflows from borrowing on notes, mortgages, bonds, etc. from creditors fall under?

Answer 13

CFF

Question 14

The net cash flows from CFO, CFI and CFF must equal what?

Answer 14

The net increase (or decrease) in cash

Question 15

How is the basic accounting equation modified to calculate cash flows

Answer 15

delta cash assets = delta liabilities + delta SE - delta non-cash assets

(non-cash assets are subtracted from assets and moved to other side of equation)

Question 16

when preparing a cash flow statement and marking each change in balance sheet account value from the previous year to the current, what items fall under “O”

Answer 16

1. Most current assets
2. Most current liabilities (not amounts owed to investors and financial institutions - these are marked with “F”)
3. Retained Earnings

Examples:
Accounts recv.
Inventories
Accounts payable
Accrued exp.

Question 17

when preparing a cash flow statement and marking each change in balance sheet account value from the previous year to the current, what items fall under “I”

Answer 17

Examples:
Short Term Investments
Property, Plant, and Equipment, net

Question 18

when preparing a cash flow statement and marking each change in balance sheet account value from the previous year to the current, what items fall under “F”

Answer 18

Examples:
Long-Term Debt
Contributed Capital (includes common stock and additional paid-in capital)
Retained Earnings (only those relating to dividends declared and paid)