Chapter 5- Cash flows

Question 1

Definition of cash

Answer 1

includes both cash and cash equivalents (must convert within 3 months)

Question 2

Statement of cash flows

Answer 2

reflects on cash basis, includes operating, investing and financing activities

Question 3

Operating activities

Answer 3

sale of goods and service to customers, changes in current assets or liabilities

Question 4

Cash flows from operating activities

Answer 4

result of day-to-day business, source of debt repayments, source of future dividend payouts

Question 5

Investing activities

Answer 5

investment, sale or disposal of long term assets; PPE

Question 6

Financing activities

Answer 6

obtaining or repaying resources from shareholders and lenders

Question 7

direct or indirect method of cash flows

Answer 7

only affects operating activities

Question 8

Indirect method (reconciliation method)

Answer 8

easy to use, uses information available, provides linkage to cash flows from operating activities and net income

Question 9

what is needed to prepare cash flows?

Answer 9

statement of financial position, statement of income for the current period and additional relevant info