Understanding Cash Flow Statements

What are the three main categories of cash flows?

• Operating activities, Investing activities, Financing activities

• Revenue activities, Expense activities, Tax activities

• Sales activities, Marketing activities, Administrative activities

• Operational activities, Capital activities, Equity activities

Which of the following is included in operating cash flows?

• Cash received from investments

• Cash paid for employee salaries

• Cash paid for inventory

• Cash received from customers

Which of the following is an example of investing cash flows?

• Issuance of stock

• Purchase of equipment

• Sale of inventory

• Payment of dividends

What is the primary purpose of financing cash flows?

• To manage the company's capital structure and ensure sufficient liquidity.

• To increase the company's debt levels for higher returns.

• To invest in long-term assets without considering liquidity.

• To reduce operational costs and improve profit margins.

Which of the following would be considered a cash inflow from investing activities?

• Cash received from the sale of assets.

• Cash paid for purchasing new equipment.

• Cash paid for dividends to shareholders.

• Cash received from issuing stock.

What is the effect of issuing new stock on financing cash flows?

• Issuing new stock decreases financing cash flows.

• Issuing new stock has no effect on financing cash flows.

• Issuing new stock only affects operating cash flows.

• Issuing new stock increases financing cash flows.

Which of the following transactions would not affect cash flows?

• Non-cash transactions like depreciation.

• Investment income

• Cash sales transactions

• Loan repayments

What is the formula for calculating cash flows from investing activities?

• Cash Flows from Investing Activities = Cash Inflows from Sales - Cash Outflows for Purchases

• Cash Flows from Investing Activities = Cash Inflows from Investments - Cash Outflows for Dividends

• Cash Flows from Investing Activities = Cash Inflows from Purchases - Cash Outflows for Sales

• Cash Flows from Investing Activities = Cash Inflows from Operations - Cash Outflows for Financing

How do you treat depreciation in the cash flow statement?

• Record depreciation as a cash outflow in the financing activities section.

• Add depreciation back to net income in the operating activities section.

• Ignore depreciation in the cash flow statement entirely.

• Subtract depreciation from net income in the operating activities section.

What is the impact of paying off long-term debt on financing cash flows?

• Paying off long-term debt improves overall cash flow management.

• Paying off long-term debt has no effect on financing cash flows.

• Paying off long-term debt negatively impacts financing cash flows due to cash outflows.

• Paying off long-term debt increases financing cash flows due to cash inflows.