Cash flow1

1.       In generating cash flow from operations and secondary sources, for which category below does the company have discretion or an option not to pay out?

• a)       Payments to vendors and suppliers

• b)       Payments to employees

• c)       The payment of interest on senior debt

• d)       The payment of dividends to common shareholders

2.       Companies that have stable, sustainable operating cash flows can

• a)       Will more likely expand into risk ventures

• b)       Pay out all cash to shareholders regardless of immediate debt obligations

• c)       Often meet debt requirements in timely fashion with a cushion

• d)       Use the stable cash flows to extinguish all intangible assets on the balance sheet

3.       Which of the following is not considered a primary source of cash in managing debt obligations?

• a)       Proceeds of the sale of a closed Indonesian subsidiary

• b)       The sale of advisory services and the ensuing collecting of related fees

• c)       The use of cash reserves on the balance sheet after customers pay receivables

• d)       The sale of inventory and the ensuing conversion into receivables and then cash

4.       Which case is the best example of “trapped cash flow”?

• a)       The company maintains cash reserves on the balance sheet to pay down short-term liabilities

• b)       The company prepays all advertising and marketing costs

• c)       The company holds operating cash flow in a foreign subsidiary to reduce tax obligations at the parent

• d)       The company holds onto cash that it could pay out to shareholders as dividends

5.       In the analysis of parent companies, cash flows reported are based, in part, on

• a)       The parent company’s debt strategy, devised by the CFO

• b)       Cash dividends up-streamed to the parent company

• c)       The size of the parent company’s balance sheet

• d)       The total of investments in subsidiaries