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1.
Why is the statement of cash flow important to investors?
It helps investors determine the financial well-being of companies. The statement of cash flow does not make recommendations, nor can it provide actual data on the future.
2.
Equipment expenditures are included in which section of the statement of cash flow?
Investing activities. Equipment is considered an investment.
3.
Why is depreciation added to net income when calculating a firms cash flow from operating activities?
Cash is not paid out for it. Because the statement of cash flow records inflows and outflows of cash, depreciation must be added to net income, since it cannot be subtracted from it.
4.
On a companys statement of cash flow, the sale of property is recorded as a ______.
Cash inflow. It generates incoming cash.
5.
The statement of cash flow records inflows and outflows of cash as soon as income is earned or expenses incurred.
False. It records income and expenses regardless of when they were earned or incurred.
6.
The statement of cash flow is divided into three sections. Which of the following is not one of those sections?
Cash flows from common stock issued. Common stocks do not have their own section.
