CHAPTER 17 EXTRA PRACTICE Flashcards
What should you do to evaluate a company’s ability to generate cash?
CALCULATE FREE CASH FLOW
What would happen if a company stopped all investment in fixed assets?
OPERATIONS WOULD DECLINE OVER TIME
What procedure is used to determine free cash flow?
Net cash from operating activities is adjusted by subtracting capital expenditures and dividends.
What is the difference between free cash flow and net cash from operating activities?
Free cash flow is the net cash from operating activities minus the amounts paid for capital expenditures and dividends.
When converting net income to net cash provided by operating activities, under the indirect method,
decreases in inventory and increases in accrued liabilities are added.
In the Tolmer Company, Treasury Stock increased $15,000 from a cash purchase, and Retained Earnings increased $40,000 as a result of net income of $62,000 and cash dividends paid of $22,000. Net cash used by financing activities is
37,000
In the Winterbottom Company, land decreased $75,000 because of a cash sale for $75,000, the equipment account increased $30,000 as a result of a cash purchase, and Bonds Payable increased $100,000 from an issuance for cash at face value. The net cash provided by investing activities is
45,000
When accounts receivable decreases during the period under the indirect method,
to convert net income to net cash provided by operating activities, the decrease in accounts receivable must be added to net income.
In the Bein Company, net income is $65,000. If accounts receivable increased $35,000 and accounts payable decreased $10,000, net cash provided by operating activities using the indirect method is
20,000
Which of the following must be done in order to determine net cash provided by operating activities?
CONVERT ACCRUAL-BASED NET INCOME TO A CASH BASIS
The information in a statement of cash flows will help investors to assess the entity’s ability to
PAY ITS OBLIGATIONS WHEN THEY BECOME DUE
Which of the following statements about significant noncash transactions is correct?
These transactions can be reported in a separate section at the bottom of the statement of cash flows.
THE STATEMENT OF CASH FLOWS SHOWS THE AMOUNT OF ASH GENERATED BY ISSUING DEBT (T/F)
T
Financing activities include
LONG TERM LIABILITY AND OWNERS EQUITY ITEMS
When a statement of cash flows is prepared, the primary purpose is to
provide information about the cash receipts and cash payments of an entity during a period.
