which 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.

which 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.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter21: The Statement Of Cash Flows

Section: Chapter Questions

Problem 1MC: Which of the following would be considered a cash outflow for investing activities? a. cash paid to...

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Similar questions

What insight does the calculation of free cash flow provide about the companys cash flow position?
Which of the following statements is false? A. Noncash activities should be reported in accrual basis financial statements. B. Net cash flow from operating activities relates to normal business operations. C. Net income usually equals net cash flow from operating activities. D. The statement of cash flows is an essential part of the basic financial statements.
Which of the following would be considered a cash outflow for investing activities? a. cash paid to purchase product for inventory b. cash paid to reacquire common stock c. cash paid to repay debt d. cash paid to purchase equipment
Which of these transactions would not be part of the cash flows from the operating activities section of the statement of cash flows? A. credit purchase of inventory B. sales of product, for cash C. cash paid for purchase of equipment D. salary payments to employees
Which of the following statements is true? a. Net cash flow from operating activities must be determined using the indirect method. b. The indirect method adjusts sales for changes in noncash items to produce net cash flow from operating activities. c. Many companies prefer the indirect method because it is easier and less costly to prepare. d. The FASB prefers the indirect method.
Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
Why is using the direct method to prepare the operating section of the statement of cash flows more challenging for accountants than preparing the balance sheet, income statement, and retained earnings statement?
Which of the following sentences regarding the statement of cash flows is false? The statement of cash flows describes the companys cash receipts and cash payments for a period of time. The statement of cash flows reconciles the beginning and ending cash balances shown on the balance sheet. The statement of cash flows reports cash flows in three categories: cash flows from business activities, cash flows from investing activities, and cash flows from financing activities. The statement of cash flows may be used by creditors to asses the creditworthiness of a company.
Which of the following would be classified as a cash outflow from an operating activity? a. Purchase of an investment b. Payment of dividends c. Purchase of equipment d. Payment of goods purchased from suppliers
Is it impossible for a company to report positive net income on the income statement but have negative cash flows from operating activities on the statement of cash flows? Yes or No? Thanks :)
When using EBITDA instead of net income to measure a firm’s operational characteristics, why are depreciation and amortization expense added back? Depreciation and amortization expense represent expenses from an accounting standpoint but don’t represent actual cash outflows. Depreciation and amortization expense represent an insignificant cash outflow for a business. Depreciation and amortization expense are superficial. Depreciation and amortization expense are random numbers and can be ignored.
The statement of cash flows is useful to the analyst because__________. Select one: a. focusing on net income can be misleading if a company has a healthy profit, but cannot translate the profit into cash b. the statement of cash flows reveals why a company was able to generate a profit c. it is the only source in statement of comprehensive income for learning about cash generation d. focusing on net income is truthful if a company has a healthy profit and it can translate the profit into cash