Financial Analysis-Cash flow

Under the accrual basis of accounting, which of the following statements is true?

I. Reported net income provides a measure of operating performance.
II. Revenue is recognized when cash is received, and expenses are recognized when payment is made.
III. Cash inflows are recognized when they are received, and cash outflows are recognized when they are made. 

• I only

• III only

• I and III

• I, II, and III

Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method?

I. Sale of machinery for $50,000 with a net book value of $35,000
II. Purchase of supplies for cash
III. Remittance by customer in payment of goods purchased this accounting period
IV. Acquisition of land with simultaneous issuance of long-term note 

• I

• I and II

• I and III

• I and IV

Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method?

I. Depreciation expense
II. Loss on sale of asset
III. Sale of services to customers for cash
IV. Utility bill received and paid in cash 

• I

• I and II

• I and III

• IV

Which of the following represents an investing activity in the statement of cash flows? 

• Depreciation of plant assets

• Sale of plant assets at a loss

• Stock dividend

• Purchase of inventory

Which of the following is not a financing activity in the statement of cash flows? 

• Cash dividend

• Repurchase of common stock

• Payment of interest on debt

• Issuance of new debt

A firm has net sales of $6,000, cash expenses (including taxes) of $2,800, and depreciation of $1,000. If accounts receivable increased in the period by $800, cash flows from operations equal: 

• $2,400

• $3,200

• $3,400

• $4,200

Beginning and ending accounts receivable are $76,000 and $42,000, respectively. Sales for the period total $384,000, of which $40,000 was directly for cash. How much cash was collected from making sales and collecting accounts receivable? 

• $344,000

• $418,000

• $378,000

• $376,000

Which of the following would be considered a use of cash? 

• Depreciation

• An increase in wages payable

• Sale of bonds

• An increase in working capital

The cash flow adequacy ratio: 

• measures a company's ability to generate sufficient cash flow from investing to cover debt repayments.

• measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures and debt repayment.

• measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures, inventory additions, and cash dividends.

• measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures, debt repayment, and dividends.

Which of the following is true of depreciation? 

• It is recorded so that net book value represents fair value of assets

• It does not affect the amount of cash realized from operations as it is a noncash flow.

• It is added back to net income to calculate cash from operations under the direct method.

• It represents a fund from which to purchase future assets