Cash Flow

7360 Words Apr 23rd, 2013 30 Pages
Chapter 5
Statement of Cash Flows

Learning Objectives

1. Identify the purposes of the statement of cash flows 2. Classify activities affecting cash as operating, investing, or financing activities 3. Compute and interpret cash flows from financing activities 4. Compute and interpret cash flows from investing activities 5. Use the direct method to calculate cash flows from operations 6. Use the indirect method to explain the difference between net income and net cash provided by (used for) operating activities 7. Understand why we add depreciation to net income when using the indirect method for computing cash flow from operating activities 8. Show how the balance sheet equation provides
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a. True b. False

L.O.: 3 Type: Easy Solution: b

20. The purchase of treasury stock would be considered a financing activity. a. True b. False

L.O.: 3 Type: Easy Solution: a

21. Payment of dividends is a financing activity. a. True b. False

L.O.: 3 Type: Moderate Solution: a

22. Receipt of loan repayments is a financing activity. a. True b. False

L.O.: 3 Type: Moderate Solution: b

23. The indirect method of determining cash from operations is most often used as this method produces larger positive cash flows. a. True b. False

L.O.: 4 Type: Easy Solution: b

24. The Financial Accounting Standards Board (FASB) prefers the indirect method of determining cash flows from operations. a. True b. False

L.O.: 4 Type: Easy Solution: b

25. Net income is always used in determining a company 's cash flow from operations. a. True b. False

L.O.: 4 Type: Easy Solution: b

26. Wages and salaries expense plus the increase in wages and salaries payable equals cash paid for wages and salaries. a. True b. False

L.O.: 4 Type: Difficult Solution: b

27. Both the direct and indirect methods yield the same cash flow from operations. a. True b. False

L.O.: 4 Type: Easy Solution: a

28. The indirect

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