Statement of Cash Flows

Multiple Choice

Which of the following activities is most likely to be classified as an operating activity in a statement of cash flows?

• Paying salaries to employees

• Purchasing new equipment

• Issuing shares to raise capital

• Repaying a long-term loan

Open Ended

Why is it important for businesses to understand the different types of cash flows (operating, investing, and financing) when analyzing their financial health?

Multiple Choice

Which of the following best describes cash equivalents?

• Highly liquid short-term investments within three months of maturity

• Long-term investments held for over a year

• Physical currency only

• Restricted cash held for legal reasons

Multiple Select

Which of the following are considered cash inflows from operating activities?

• Collecting from customers

• Receiving dividends

• Paying salaries and wages

• Receiving interest

Multiple Choice

What is the main purpose of investing activities in the statement of cash flows?

• To manage day-to-day business operations

• To purchase and dispose of long-lived assets and investments

• To issue stock to owners

• To pay cash dividends to owners

Open Ended

Explain how financing activities impact a company’s cash flow and provide examples based on Dave & Buster’s 2022 activities.

Multiple Choice

Which balance sheet categories are most closely associated with operating activities in the statement of cash flows?

• Current assets and current liabilities

• Noncurrent assets and noncurrent liabilities

• Stockholders’ equity and noncurrent liabilities

• Current assets and stockholders’ equity

Multiple Choice

Which of the following is NOT required to prepare a Statement of Cash Flows?

• Comparative Balance Sheets

• Income Statement

• Statement of Retained Earnings

• Additional data concerning selected accounts

Open Ended

Explain how the basic balance sheet equation can be rearranged to solve for the change in cash. Why is this rearrangement useful when preparing a Statement of Cash Flows?

Multiple Select

Which of the following are true about the direct and indirect methods for reporting operating cash flows?

• Both methods result in the same net cash flow from operating activities.

• The direct method lists specific cash inflows and outflows.

• The indirect method starts with net income and adjusts for non-cash items.

• The direct method is more commonly used than the indirect method.

Multiple Choice

Based on the balance sheet data, which current asset experienced the largest increase from January 31, 2021 to January 31, 2022?

• Cash and Cash Equivalents

• Accounts Receivable

• Inventory

• Prepaid Expenses

Multiple Choice

Which changes in current assets and current liabilities are subtracted from net income when using the indirect method?

• Increases in current assets and decreases in current liabilities

• Decreases in current assets and increases in current liabilities

• Increases in current assets and increases in current liabilities

• Decreases in current assets and decreases in current liabilities

Multiple Choice

Which of the following items would require an adjustment to net income when using the indirect method to calculate operating cash flows?

• Depreciation expense

• Increase in inventory

• Decrease in accounts payable

• All of the above

Multiple Choice

What is the first step in preparing the statement of cash flows using the indirect method for Dave & Buster’s Entertainment, Inc.?

• Start with net income from the income statement

• Start with total assets from the balance sheet

• Start with cash and cash equivalents

• Start with retained earnings

Open Ended

Explain why depreciation expense is added back to net income when using the indirect method to calculate operating cash flows.

Multiple Choice

Which of the following adjustments is made to reconcile net income to net cash provided by operating activities for Dave & Buster’s Entertainment, Inc. for the year ended January 31, 2022?

• Depreciation

• Interest Expense

• Dividends Paid

• Income Tax Expense

Open Ended

Explain how an increase in inventory affects the calculation of cash flows from operating activities.

Multiple Choice

Based on the statement of cash flows, which items are considered changes in current assets and current liabilities for Dave & Buster’s Entertainment, Inc.?

• Accounts Receivable, Inventory, Prepaid Expenses, Accounts Payable, Accrued Liabilities

• Depreciation, Net Income, Interest Expense, Dividends Paid, Income Tax Expense

• Equipment, Intangible Assets, Property, Cash

• Sales Revenue, Cost of Goods Sold, Operating Expenses, Net Profit

Open Ended

Compare and contrast the cash flow effects of purchasing property and equipment versus selling intangible assets. Use the information provided in the table to support your answer.

Multiple Choice

According to the statement of cash flows for Dave & Buster’s Entertainment, Inc., what was the total net cash used in investing activities for the year ended January 31, 2022?

• $77 million

• $73 million

• $4 million

• $109 million

Open Ended

How do you think understanding the different types of cash flows (operating, investing, and financing) can help a business make better financial decisions?

Multiple Choice

What are the three main types of activities from which cash flows arise in a business?

• Operating, Investing, and Financing activities

• Sales, Purchases, and Marketing activities

• Production, Distribution, and Human Resources activities

• Research, Development, and Advertising activities

​Statement of Cash Flows

By Steven Howard