Statement of Cash Flows

Question 1

There are 3 categories of cash flows, what are they?

Answer 1

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

Question 2

Describe cash flows from financing activities

Answer 2

cash flow related to obtaining capital of the company- Ie issuance and repayment of debt, common stock transactions, and the payment of dividends

Question 3

Describe cash flows from operating activities

Answer 3

any cash flows directly related to earning income- cash sales and collections of accounts receivable as well as cash payments for goods, services, salaries, and interest

Question 4

Describe cash flows from investing activities

Answer 4

cash flow related to the acquisition or sale of investments and long-term assets such as property, plant, and equipment
*Note - investing activities of a healthy, growing business often reflect an excess of expenditures over receipts

Question 5

What is the “statement of cash flows”?

Answer 5

describes the company’s cash receipts (cash inflows) and cash payments (cash outflows) for a period of time

Question 6

How is the statement of cash flows used?

Answer 6

an important source of information as users attempt to answer how a company generated and used cash during a period.
-Creditors can use the statement of cash flows to assess the creditworthiness of a company
-Stockholders are also interested in the adequacy of cash flows as an indicator of the company’s ability to pay dividends and to expand its business