WorksheetsQuiz on Cash Flow Analysis (BSBM FM 3B)
Total questions: 30
Worksheet time: 36mins
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
A company that consistently reports positive net income but negative cash flow from operating activities might be experiencing:
Overstated depreciation expenses
Aggressive revenue recognition or inflated sales
Excessive investment in new equipment
Significant issuance of new equity
What does a positive cash flow from operating activities indicate?
The company generates sufficient cash to cover its operational expenses
The company is facing financial difficulties
The company has excessive debt
The company has the ability to pay its total debts
Why is cash flow analysis important for investment decisions?
It determines the company's market share
It helps in evaluating the feasibility and profitability of potential investments
It assesses the employee performance
All of the above
Which is not an advantage of the direct method?
Preparation is straightforward with information from the income statement and balance sheet, as it primarily requires adjustments to net income.
Easier to prepare as it provides a clear view of actual cash transactions, making it easier to understand the sources and uses of cash
Offers detailed information about cash receipts from customer and cash payments to suppliers and employees
None of the above
Which of the following is considered a cash payment to suppliers in the direct method?
Cash spent on salaries and wages
Cash used to purchase long-term equipment
Cash paid for inventory and raw materials
Interest paid on loans
Which of the following best describes the direct method of preparing a cash flow statement?
It adjusts net income by accounting for changes in assets and liabilities.
It lists major operating cash receipts and payments during the period.
It reflects cash transactions related to financing activities only.
It provides an overview of cash flows from investing and financing activities.
Which of the following is a benefit of using the direct method for the cash flow statement?
Easier to prepare
Focuses on net income
Provides a detailed view of actual cash flows
Only includes cash inflows
When using the direct method to prepare a cash flow statement, what is the first item typically listed under the operating activities section?
Cash received from customers
Depreciation expense
Net Income
Cash paid to suppliers
A company records a large gain on the sale of an asset in its income statement. How should this be treated in the cash flow statement under the indirect method?
Added to net income in the operating section
Deducted from net income in the operating section
Recorded as a cash inflow in the investing section
Ignored because it's a non-cash item
Which of the following is NOT considered an operating cash flow?
Cash paid for salaries
Cash received from the sale of goods
Cash paid for dividends
Cash paid for rent
What is the primary difference between the direct and indirect methods of preparing the operating section of a cash flow statement?
The treatment of financing activities
The inclusion of cash equivalents
The method of calculating cash flows from operating activities
The treatment of investing activities
Operating activities refer to:
Actions that generate long-term investments
The primary activities a business undertakes to produce and provide goods or services
Non-production related activities
Financing actions like issuing stocks or bonds
After generating a sizable year and profit, Espresso Company declared and issued a 50% stock dividend. In the preparation of the cash flows the transaction would be included as
A financing activity
Would not appear at all on a statement of cash flows.
An investing activity
An operating activity
Which item below is NOT considered a reconciling item when a statement of cash flows is prepared using the indirect method?
depreciation expense
a change in inventory
a change in current debt
net income
If a company collects Php200,000 in cash from customers and pays Php120,000 to suppliers, Php40,000 to employees, Php5,000 in interest, and Php10,000 in taxes, what is the net cash provided by operating activities?
Php200,000
Php35,000
Php25,000
Php15,000
Wings Company reported net income of Php200,000 for the year. During the year, accounts receivable decreased by Php10,000, inventory increased by Php8,000, accounts payable increased by Php6,000, depreciation expense of Php10,000 was recorded, and land was purchased for Php150,000 in cash. Net cash provided by operating and investing activities for the year is?
Php218,000
Php68,000
Php214,000
Php202,000
FM Company had a net income of Php890,000. Depreciation expense is Php110,000. During the year, accounts receivable and inventory increased Php60,000 and Php160,000, respectively. Prepaid expenses and accounts payable decreased Php8,000 and Php16,000, respectively. How much cash was provided by operating activities?
Php772,000
Php784,000
Php1,184,000
Php1,196,000
GC Corporation's financial statements contain the following information: Prepaid Insurance, beginning: Php10,000 Insurance expense for the year: Php20,000 Prepaid Insurance, ending: Php8,000 What is the amount of cash paid for insurance during the year using the direct method?
Php13,000
Php17,000
Php18,000
Php23,000
Yes Company's income statement for the year ended December 31, 2023, reported net income of Php360,000. The financial statements also disclosed the following information: Amortization Php20,000 Depreciation 60,000 Increase in accounts receivable 140,000 Increase in inventory 48,000 Increase in accounts payable 76,000 Dividends paid 120,000 Purchase of equipment 150,000 Decrease in salaries payable 28,000 Increase in long-term note payable 300,000 Net cash provided by operating activities for 2023 should be reported as
Php84,000.
Php204,000.
Php234,000.
Php300,000.
The following information is available from the financial statements of BINI Corporation for the year ended December 31, 2023: Net income Php396,000 Depreciation expense 102,000 Decrease in accounts receivable 126,000 Increase in inventories 90,000 Decrease in accounts payable 24,000 Payment of dividends 54,000 Purchase of available-for-sale securities 22,000 Increase in income taxes payable 16,000 What is BINI Corporation's net cash flow from operating activities?
Php440,000
Php466,000
Php526,000
Php542,000
