Chapter 9 - Cash Flow Statements

Question 1

Cash equivalents

Answer 1

Short term investments that are readily convertible to known amts of cash; very unlikely to change in value

Question 2

3 types of business activities

Answer 2

• Operating activities
• Investing activities
• Financing activities

Question 3

Operating activities :

Answer 3

Activities that comprise the main revenue - producing activities of a company, and generally result from the transactions and other events that determine net income.

Question 4

Investing activities :

Answer 4

The purchase and sale of long-term assets and other investments that don’t qualify as cash equivalents

Question 5

Financing activities :

Answer 5

Activities that result in changes in the size and composition of a company’s contributed equity and borrowing

Question 6

2 methods of deterring cash flow from operating activities :

Answer 6

1. Indirect method
2. Direct method

Question 7

Indirect method :

Answer 7

Net income is adjusted for non-cash transactions, deferrals or accruals of post/future operating cash receipts/payments, and for items of income/expense associated w investing or financing cash flows

Question 8

Direct method :

Answer 8

Reports all cash receipts and cash payments from operating activities

Question 9

Non-cash operating working capital accounts :

Answer 9

Current asset/liability acc that derives from an operating activity and isn’t included in cash and cash equivalents

Question 10

Free cash flow :

Answer 10

Measure of how much cash a company has available to pursue new business opportunities

Question 11

Operating cash flow ratio

Answer 11

Cash Flow from Operations / Current Liabilities