Chapter 16

Question 1

Short-term investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes.

Answer 1

Cash equivalents

Question 2

Ratio of operating cash flows to average total assets; not sensitive to income recognition and measurement; partly reflects on earnings quality.

Answer 2

Cash flow on total assets

Question 3

Presentation of net cash from operating activities for the statement of cash flows that lists major operating cash receipts less major operating cash payments.

Answer 3

Direct method

Question 4

Transactions with owners and creditors that include obtaining cash from issuing debt, repaying amounts borrowed, and obtaining cash from or distributing cash to owners.

Answer 4

Financing activities

Question 5

Presentation that reports net income and then adjusts it by adding and subtracting items to yield net cash from operating activities on the statement of cash flows.

Answer 5

Indirect method

Question 6

Transactions that involve purchasing and selling of long-term assets; includes making and collecting notes receivable and investments in other than cash equivalents.

Answer 6

Investing activities

Question 7

Activities that involve the production or purchase of merchandise and the sale of goods or services to customers, including expenditures related to administering the business.

Answer 7

Operating activities

Question 8

A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged by operating, investing, and financing.

Answer 8

Statement of cash flows