Financial Reporting - Statement of CF/Fin. Analysis Techniques

The sale of a building for cash would be classified as what type of activity on the

cash flow statement?

• Operating.

• Investing.

• Financing.

A conversion of a face value $1 million convertible bond for $1 million of common

stock would most likely be:

• reported as a $1 million investing cash inflow and outflow.

• reported as a $1 million financing cash outflow and inflow.

• reported as supplementary information to the cash flow statement.

Interest paid is classified as an operating cash flow under:

• US GAAP but may be classified as either operating or investing cash flows

  under IFRS.

• IFRS but may be classified as either operating or investing cash flows under

  US GAAP.

• US GAAP but may be classified as either operating or financing cash flows

  under IFRS.

Which of the following is most likely to appear in the operating section of a

cash flow statement under the indirect method?

• Net income.

• Cash paid to suppliers.

• Cash received from customers.

Red Road Company, a consulting company, reported total revenues of $100 million, total expenses of $80 million, and net income of $20 million in the most

recent year. If accounts receivable increased by $10 million, how much cash did

the company receive from customers?

• $90 million.

• $100 million.

• $110 million.

Purple Fleur S.A., a retailer of floral products, reported cost of goods sold for

the year of $75 million. Total assets increased by $55 million, but inventory

declined by $6 million. Total liabilities increased by $45 million, and accounts

payable increased by $2 million. The cash paid by the company to its suppliers

is most likely closest to:

• $67 million.

• $79 million.

• $83 million.

An analyst gathered the following information from a company’s 2018 financial statements (in $ millions).

Based only on the information above, the company’s 2018 statement of cash flows in the direct format would include amounts (in $ millions) for cash received from customers and cash paid to suppliers, respectively, that are closest to:

• cash received from customers = $249.70; cash paid to suppliers = $169.70

• cash received from customers = $259.50; cash paid to suppliers = $174.50

• cash received from customers = $259.50; cash paid to suppliers = $182.10

Based on the following information for Star Inc., what are the total net adjustments that the company would make to net income in order to derive operating cash flow?

• Add $2 million.

• Add $6 million.

• Subtract $6 million.

Which of the following is an appropriate method of computing free cash flow to the firm?

• Add operating cash flows to capital expenditures and deduct after-tax interest payments.

• Add operating cash flows to after-tax interest payments and deduct capital expenditures.

• Deduct both after-tax

  interest payments and capital expenditures from

  operating cash flows.

An analyst has calculated a ratio using as the numerator the sum of operating

cash flow, interest, and taxes and as the denominator the amount of interest.

What is this ratio, what does it measure, and what does it indicate?

• This ratio is an interest coverage ratio, measuring a company’s ability to meet its interest obligations and indicating a company’s solvency.

• This ratio is an effective tax ratio, measuring the amount of a company’s operating cash flow used for taxes and indicating a company’s efficiency in tax management.

• This ratio is an operating profitability ratio, measuring the operating cash flow generated accounting for taxes and interest and indicating a company’s

  liquidity.