Chapter 16

Question 1

direct approach

Answer 1

The preferred method for preparing the statement of cash flows; operating cash flows are presented according to their direct source (e.g., cash received from customers)

Question 2

financing activities

Answer 2

A cash flow category; including receipts from stock issues, bonds, notes and loans, – and payments for loan repayment, acquisitions of treasury stock, and dividend distributions.

Question 3

indirect approach

Answer 3

An alternative method for preparing the statement of cash flows; operating cash flows are presented as a reconciliation of income to cash from operating activities.

Question 4

investing activities

Answer 4

A cash flow category; including receipts from disposal of investments and long-term assets – and payments to acquire long-term assets and investments.

Question 5

operating activities

Answer 5

A cash flow category; generally related to transactions that enter into the determination of income – items that are not investing or financing.

Question 6

statement of cash flows

Answer 6

A financial statement that summarizes the cash flows relating to operating, investing, financing, and noncash investing/financing activities of an entity.