Cash Flow Statement Analysis Quiz

What is the purpose of a cash flow statement?

• To track employee attendance

• To monitor inventory levels

• To provide information about a company's cash inflows and outflows

• To measure customer satisfaction

Explain the difference between operating, investing, and financing activities in a cash flow statement.

• Investing activities involve paying off short-term debts

• Operating activities involve marketing and advertising expenses

• Financing activities involve purchasing inventory

• Operating activities involve day-to-day business activities, investing activities involve the purchase or sale of long-term assets, and financing activities involve borrowing or repaying debt and issuing or buying back stock.

How can a company's cash flow statement help in assessing its financial health?

• By providing information about the company's ability to generate cash and meet its financial obligations.

• By indicating the company's success in training pet dogs

• By showing the company's ability to bake delicious cakes

• By providing information about the company's social media presence

What are the key components of a cash flow statement?

• Sales activities, purchasing activities, and borrowing activities

• Revenue activities, expenditure activities, and investment activities

• Operating activities, investing activities, and financing activities

• Income activities, expense activities, and loan activities

Discuss the importance of free cash flow in cash flow statement analysis.

• Free cash flow only reflects a company's past performance, not its future potential

• Free cash flow has no impact on a company's financial health

• Free cash flow is irrelevant in determining a company's ability to generate cash

• Free cash flow provides insight into a company's financial health and its ability to generate cash for future growth.

How can an investor use the information from a company's cash flow statement to make investment decisions?

• By checking the company's social media presence

• By assessing the company's ability to generate cash, its liquidity, and its overall financial health.

• By looking at the CEO's personal life

• By analyzing the company's marketing strategy

What are the limitations of using only the cash flow statement for financial analysis?

• Inability to assess liquidity, lack of information about profitability, absence of details about operating, investing, and financing activities

• Lack of information about profitability, inability to assess liquidity and solvency, absence of details about operating, investing, and financing activities

• Lack of information about solvency, inability to assess financing activities, absence of details about investing activities

• Inability to assess profitability, lack of details about operating activities, absence of information about liquidity

Explain the concept of cash flow from operating activities and its significance in evaluating a company's performance.

• Cash flow from financing activities measures the cash generated or used by a company's core business operations and is significant in evaluating a company's performance.

• Cash flow from operating activities measures the cash generated or used by a company's core business operations and is significant in evaluating a company's performance.

• Cash flow from operating activities measures the non-cash items related to a company's core business operations and is significant in evaluating a company's performance.

• Cash flow from investing activities measures the cash generated or used by a company's core business operations and is significant in evaluating a company's performance.

What are some common ratios used in cash flow statement analysis?

• Operating cash flow ratio, free cash flow ratio, and cash flow to debt ratio

• Profit margin ratio, inventory turnover ratio, and current ratio

• Debt to equity ratio, quick ratio, and asset turnover ratio

• Earnings per share ratio, price-earnings ratio, and return on equity ratio

Discuss the impact of changes in working capital on a company's cash flow statement.

• Changes in working capital have no impact on a company's cash flow statement

• Changes in working capital only impact a company's income statement

• Changes in working capital directly impact a company's cash flow statement as they affect the cash flow from operating activities.

• Changes in working capital only impact a company's balance sheet