WorksheetsCash Flow Quiz
Total questions: 20
Worksheet time: 10mins
A company sells a piece of machinery for cash. Where would this transaction be classified on the statement of cash flows?
Operating Activities
Investing Activities
Financing Activities
It is not a cash flow item
A company pays back a long-term bank loan. How is this transaction reported on the statement of cash flows?
Cash Inflow from Operating Activities
Cash Outflow from Investing Activities
Cash Outflow from Financing Activities
Cash Inflow from Financing Activities
Which of the following is an example of a cash outflow from operating activities?
Issuing new shares of common stock
Purchasing a building for future use
Payment of salaries to employees
Repaying a bond payable
Under the indirect method, which item is added back to net income to calculate cash flow from operations?
Gain on the sale of equipment
Increase in accounts receivable
Depreciation expense
Dividends paid
A company issues a dividend to its shareholders. Where would this transaction be classified?
Operating Activities
Investing Activities
Financing Activities
Non-cash transaction
An increase in a company's accounts payable would be shown as what on the statement of cash flows (indirect method)?
A deduction from net income
An addition to net income
A cash outflow from investing activities
A cash inflow from financing activities
Which of the following would be classified as a cash outflow from investing activities?
Payment of interest on a bank loan
Purchase of a new manufacturing plant
Repayment of the principal of a bank loan
Payment of dividends to shareholders
A company issues new long-term debt. Where would this cash inflow be reported?
Operating Activities
Investing Activities
Financing Activities
It is not a cash flow item
Which of the following is considered a non-cash investing and financing activity?
The payment of cash dividends
The conversion of bonds to common stock
The sale of a long-term asset for cash
The purchase of inventory on credit
A decrease in a company's inventory balance, all else being equal, would lead to what adjustment under the indirect method?
A deduction from operating income
An addition to operating income
A cash outflow from investing activities
No adjustment is necessary
Which statement best describes the purpose of the statement of cash flows?
To show a company's profitability over a period of time
To provide a snapshot of a company's assets, liabilities, and equity at a specific point in time
To explain the changes in cash and cash equivalents during a period
To report a company's non-cash transactions
What is the primary difference between the direct and indirect methods of reporting cash flow from operating activities?
The indirect method is used by public companies, while the direct method is used by private companies.
The direct method starts with net income, while the indirect method starts with gross profit.
The direct method reports major classes of gross cash receipts and payments, while the indirect method reconciles net income to cash flow from operations.
The indirect method is more accurate than the direct method.
A company issues a large amount of new common stock. This is a major source of cash for the company. Where would this cash be reported?
Operating Activities
Investing Activities
Financing Activities
Non-cash transaction
A company repays the principal amount of a bond that is coming due. This is a significant cash outflow. How would it be categorized?
Operating Activities
Investing Activities
Financing Activities
Non-cash transaction
A company's cash flow from operations is a negative value. Which of the following is a possible reason for this?
The company has a very low net income but high depreciation expense.
The company has invested a significant amount in new equipment.
The company has a large increase in accounts receivable and inventory.
The company has issued a large amount of new common stock.
What is the effect on cash flow from operations when there is a decrease in accounts payable?
It is a cash inflow, so it is added to net income.
It is a cash outflow, so it is subtracted from net income.
It is a financing activity and does not affect operating cash flow.
There is no effect, as it is a non-cash transaction.
A company sells a long-term investment in another company's stock for a profit. Where would the cash received be reported?
Cash Inflow from Operating Activities
Cash Inflow from Investing Activities
Cash Inflow from Financing Activities
It is not a cash flow item
Which of the following is a non-cash transaction that should be disclosed in a separate schedule or note to the financial statements?
Purchase of inventory for cash
Issuing new bonds for cash
Acquiring a building by issuing common stock
Payment of interest on a bank loan
Under the indirect method, a loss on the sale of equipment is treated as what?
A deduction from net income to calculate operating cash flow.
An addition to net income to calculate operating cash flow.
A cash outflow from investing activities.
A financing activity, as it relates to a fixed asset.
What does a negative cash flow from financing activities primarily indicate?
The company is not profitable and is losing money.
The company is a startup that is raising significant capital.
The company is repaying debt and/or buying back its own stock.
The company is expanding its operations by purchasing new assets.
