Quiz on Cash Flow Analysis (BSBM FM 3B)

Which of the following would be included in both the income statement and the cash flow statement?

• Depreciation expense

• Gain on sale of assets

• Interest paid

• Amortization of intangible assets

In the indirect method, the cash flow from operating activities is calculated by:

• Subtracting all expenses directly from cash inflows

• Adjusting the net income for changes in working capital and non-cash expenses

• Showing only cash inflows

• Directly listing all cash inflows and outflows from operations

In the direct method, which of the following is typically not reported under operating activities?

• Cash received from customers

• Cash paid to suppliers

• Depreciation expense

• Cash paid for salaries and wages

Cash paid for a loan repayment is presented under which category of cash flow?

• Operating Activities

• Investing Activities

• Financing Activities

• Direct Method

What is the primary purpose of the Statement of Cash Flows?

• To report the company's profitability

• To provide information on cash receipts and payments during an accounting period

• To assess the company's liquidity ratios

• To evaluate the company's equity

The following is cash outflow from investing activities?

• Purchase of land

• Sales of equity or debt instruments of other entities

• Purchase of property, plant, and equipment

• All except sales of equity or debt instruments of other entities

Which of the following is an example of a cash outflow from operating activities?

• Purchase of equipment

• Issuing common stock

• Payment to suppliers

• Repayment of loan principal

How is a decrease in accounts receivable reflected in the preparation of the cash flow statement using the indirect method?

• It is added to net income

• It is subtracted from net income

• It is not reflected in the cash flow statement

• It is included in financing activities

If a company reports a significant increase in accounts receivable over the reporting period, what could this suggest in terms of cash flow from operations?

• The company's cash flow from operations is understated

• The company's cash flow from operations is likely overstated

• The company has accelerated cash collections

• The company is expanding its credit sales significantly

How is a decrease in prepaid expenses reflected in the cash flow statement using the indirect method?

• Added to net income

• Subtracted from net income

• Ignored in the cash flow statement

• Classified under financing activities