Module 5

Question 1

The ______________is the third and final of the

financial statements.

Answer 1

statement of cash flows

other two: balance sheet and income statement

Question 2

What is the purpose of the statement of cash flows?

Answer 2

Provide a more detailed picture of what happened to a business’ cash during an accounting period.

Question 3

The statement of cash flows shows the different areas in which a business _____ or _______ cash, and
reconciles the beginning and ending cash balances.

Answer 3

used; received

Question 4

_______ are important for valuing a business and managing liquidity and are essential to understand where actual cash is being generated and used.

Answer 4

Cash flows

Question 5

The statement of cash flows gives more detail about the ______ of cash inflows and the uses of cash outflows.

Answer 5

sources

Question 6

What are the three sections of the statement of cash flows?

Answer 6

1. Operating Activities
2. Investing Activities
3. Financing Activities.

Question 7

The Cash Flows from _____________ section includes information on cash used or received in the process
of preparing and providing goods or services to customers.

Answer 7

Operating Activities

Question 8

What section in the statement of cash flows is closely tied to net income?

Answer 8

Operating Activities

It essentially shows what net income would be under the cash accounting method.

Question 9

What are the two methods for preparing the operating activities section?

Answer 9

Direct and Indirect Method

Question 10

What number do the direct and indirect method share in common?

Answer 10

Net cash flow from operating activities

Question 11

To calculate the ______ method simply take all of the cash collections from operating activities and subtract all of the cash disbursements from operating activities.

Answer 11

Direct

Question 12

What type of information does the direct method use?

Answer 12

This method uses

transactional information that impacted cash during the period.

Question 13

To calculate the ______ method start with net income from the income statement and make adjustments to undo the impact of the accruals that were made during the period.

Answer 13

Indirect

Question 14

The Cash Flows from _____________ section of the statement of cash flows contains cash flows relating to
long-lived assets, such as property, plant, and equipment.

Answer 14

Investing Activities

Question 15

When it comes to Investing Activities Additional inflows and outflows that would be included in this section relate to loans made to another entity, called _________, and certain investment securities.

Answer 15

loans receivable

Question 16

The Cash Flows from _____________includes cash flows associated with raising and paying back money to investors and creditors.

Answer 16

Financing Activities

Question 17

_________ paid are included in the Financing Activities section under US GAAP, but under IFRS __________
paid may be included in the operating rather than the financing section.

Answer 17

Dividends; dividends

Question 18

While interest paid is included in the __________ under US GAAP, it can sometimes be included in ___________ under IFRS.

Answer 18

operating section; financing activities

Question 19

As with all financial statements, we should _______ the information on the statement of cash flows with
the context of the business in mind.

Answer 19

interpret

Question 20

A ________ business will typically have negative or very low cash flow from operating activities, negative cash flow from investing activities, and large fluctuations in cash flow from financing activities.

Answer 20

start-up

Question 21

A _________ business will usually have positive cash flow from operating activities, negative cash flow from investing activities, and positive, negative, or neutral cash flow from financing activities.

Answer 21

profitable/growing

Question 22

A _________ company will generally have positive cash flow from operating activities, slightly negative cash flow from investing activities, and negative cash flow from
financing activities.

Answer 22

mature

Question 23

A ________ business will typically have negative cash flow from operating activities, positive cash flow from investing activities, and cash flow from financing activities that could be either positive or negative.

Answer 23

declining (business in decline)