Intro

Question 1

Construction of CF, direct or indirect, understand it

Answer 1

Direct

Indirect

(in analyzing the firms activities and prospects)

Question 2

Understand the preparation of a statement of CF’s by

Answer 2

Direct

Indirect

Question 3

Classification of CF’s as… and key differences between ‘em as IFRS, GAAP

Answer 3

Operating

Financing

Investing

Question 4

The CF statement

Answer 4

Provides info beyond that available from the income statement, which is based on accrual, rather than cash, accounting.

Question 5

What’s the CF Statement provide?

Answer 5

Cash receipt and payment info during an accounting period

Op., info., fin. activity info

Use it to understand the impact of accrual acct events on CF’s

Question 6

What’s CF say about liquidity, solvency, flexibility?

Answer 6

As Analyst use CF statement to determine whether…

Reg. ops. gen. enough cash to sustain bus.

Enough cash gen. to pay off existing debts as they mature

The firm is likely to need additional financing

Unexpected obligations can be met

The firm can take advantage of new business opportunities as they arise