The cash flow coverage ratio is a narrower metric (1.e., it considers fewer elements) than the interest coverage ratio. TRUE FALSE
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- Reporting Net Cash Flow from Operating Activities The following information is available for Cornelius Inc: Required: 1. Compute the net cash flows from operating activities using the indirect method. 2. CONCEPTUAL CONNECTION Explain why Cornelius was able to report net cash flow from operating activities that was higher than net income. 3. CONCEPTUAL CONNECTION What could the difference between net income and cash flow from operating activities signal to financial statement users?CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT The income statement and comparative balance sheet for Front Row Entertainment are shown below: What conclusions can you draw about Front Row from the observed pattern of cash flows?Given the following information, convert Cardinal Companys cost of goods sold from its income statement into payments to suppliers for its statement of cash flows.
- Net income equals: Select one: a. Assets minus liabilities. b. Cash receipts minus cash payments. c. Revenues minus expenses. d. Revenues minus cost of goods sold.In the Statement of Cash Flows how is cash spent for production is computed ?a) Cost of goods sold – increases in Inventory – Increases in Trades Payableb) Cost of goods sold + increases in Inventory – Decreases in Trades Payablec) Cost of goods sold + increases in Inventory – Increases in Trades Payabled) Cost of goods sold - increases in Inventory + Decreases in Trades Payablewhich of the following statements regarding free cash flow is true? a.Free cash flow measures the operating cash flow of a company after the purchase of inventory. b.Free cash flow is a valuable tool for evaluating net income. c.Free cash flow ignores productive capacity. d.None of these choices are correct.
- 7. A cash flow statement prepared in accordance with IAS 7 opens with the calculation of cash flows from operating activities from the net profit before taxation. Which of the following lists of items consists only of items that would be added to net profit before taxation in that calculation? a. Increase in trade payables, decrease in trade receivables, profit on sale of non-current assets. b. Loss on sale of non-current assets, depreciation, increase in trade receivables. c. Decrease in trade receivables, increase in trade payables, loss on sale of non-current assets. d. Decrease in inventories, depreciation, profit on sale of non-current assets.Which of the following calculations of net income is correct? Select one: Cash receipts minus cash payments Assets minus liabilities Revenues minus cost of goods sold Revenues and gains minus expenses and lossesWhich of the statements is Not True about operating cash flowsa) Depreciation expenses are subtracted from cash outflowsb) Increases in inventories are deducted from cost of the goods soldc) It is equal to cash collected from sales - cash outflows for production costs- cash outflows for operating expenses – cash outflows for financial expenses – cash outflows for taxesd) Increases in the trade receivables are deducted from net sales
- Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a.a decrease in accounts payable b.an increase in inventory c.preferred dividends declared and paid d.a decrease in accounts receivableexplain how Value drivers are related to financial statement analysis and explain their behavior over time. Can a company reply on net income as a valid measure of cash needed to pay fixed charges? Explain you answer Explain why companies do not include principle payment requirement when calculating earnings to fixed charges ratio.b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses? c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows? d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.