Cashflow Statement

What is the primary purpose of the cashflow statement?

• To analyze the company's debt structure

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

• To provide information about a company's revenue

• To track the company's inventory levels

Give an example of an operating activity in the cashflow statement.

• Dividend payment

• Issuance of bonds

• Purchase of equipment

• Payment of salaries

Explain why depreciation is added back to net income in the operating activities section.

• Depreciation is a cash expense that reduces net income.

• Depreciation is a non-cash expense that needs to be added back to net income to reflect actual cash flow.

• Depreciation is only added back if it exceeds a certain threshold.

• Depreciation is not relevant to operating activities.

How are dividends paid to shareholders classified in the cashflow statement?

• Cash outflows from investing activities

• Cash inflows from financing activities

• Cash inflows from operating activities

• Cash outflows from financing activities

What type of activities involve the purchase or sale of long-term assets in the cashflow statement?

• Operating activities

• Investing activities

• Financing activities

• Short-term investments

Why is the cashflow statement important for investors and creditors?

• Cashflow statement provides inaccurate financial information

• The cashflow statement is crucial for assessing a company's financial health, solvency, and ability to meet its financial obligations.

• Investors and creditors do not use the cashflow statement for decision-making

• The cashflow statement is only relevant for tax purposes

Provide an example of a financing activity in the cashflow statement.

• Issuing bonds

• Paying dividends

• Taking out a loan

• Selling inventory

How does the cashflow statement differ from the income statement?

• The cashflow statement is prepared on a monthly basis, while the income statement is prepared annually.

• The cashflow statement includes non-cash items, while the income statement does not.

• The cashflow statement shows the company's assets and liabilities, while the income statement does not.

• The cashflow statement focuses on cash transactions, while the income statement focuses on revenues and expenses.

What does a positive cashflow from operating activities indicate?

• Company is investing heavily in long-term assets

• Company is facing financial difficulties

• Company is not generating any revenue

• Company is generating more cash than it is spending on day-to-day operations.

Why is it important to analyze all three sections of the cashflow statement together?

• The cashflow statement is not a reliable source of financial information.

• It only focuses on one aspect of the company's finances.

• Analyzing all three sections is time-consuming and unnecessary.

• It provides a comprehensive view of a company's financial health.