37. The statements of cash flows should help investor and creditors assess each of the following except the

• entity's ability to generate future income

• entity's ability to pay dividends

• reasons for the difference between income and net cash provided by operating activities

• cash investing and financing transactions during the period

38. The statement of cash flows

• must be prepared on a daily basis

• summarizes the operating, financing, and investing activity of an entity

• is another name for the income statement

• is a special section of the income statement

39. Which one of the following items is not generally used in preparing a statement of cash flows?

• adjusted trial balance

• comparative balance sheets

• current income statements

• additional information

40. The primary purpose of the statement of cash flows is to

• provide information about investing and financing activities during a period

• prove that revenues exceed expenses if there is a net income

• provide information about the cash receipts and cash payments during a period

• facilitate banking relationships

41. If a company reports a net loss, it

• may still have a net cash increase in cash

• will not be able to pay cash dividends

• will not be able to get a loan

• will not be able to make capital expenditures

42. In addition to the three basic financial statements, which of the following is also a required financial statement

• the cash budget

• the statement of cash flows

• the statement of cash flows and out flows

• the cash reconcilliation

43. The statement of cash flows will not report the

• amount of checks outstanding at the end of the period

• sources of cash in the current period

• uses of cash in the current period

• change in the cash balance for the current period

44. Cash equivalents do not include

• short term corporate notes

• treasury bills

• money market funds

• 2-year certificates of deposit

45. Which of the following characteristics does not apply to cash equivalents

• short term

• highly liquid

• readily convertible into cash

• sensitive to interest rate changes

46. Cash equivalents are generally investments with maturities of

• $1000 or more

• three months or less

• at least six months

• one year or the operating cycle, whichever is less

Answer explanation

Cash equivalents include bank accounts and marketable securities such as commercial paper and short-term government bonds.

Cash equivalents should have maturities of three months or less.